Chapter 13 Bankruptcy
Chapter 13 Bankruptcy – Create a Payment Plan
While not everyone is eligible for Chapter 7 bankruptcy, some may still be eligible to file Chapter 13 bankruptcy and receive the necessary protection of their assets. This option allows you to create a payment plan that lasts three to five years. During this repayment period, debt collectors and creditors are not permitted to take action to collect the outstanding debt, including your mortgage, car loans, student loans, and unsecured debts.
Many people choose Chapter 13 bankruptcy because it allows for the following:
- Stopping foreclosure proceedings — It is possible to repay your mortgage and stop the foreclosure of your home. You will need to make all payments to the mortgage company, but the house cannot be foreclosed. You may also be able to modify your mortgage to make the payments manageable.
- Consolidation of student loans — You cannot eliminate your student loans, but you can consolidate them and stop collection action against you by choosing Chapter 13 bankruptcy.
- Protection of co-signers — Any co-signers you may have will receive the same protection you do under Chapter 13 bankruptcy, even while you are in your repayment plan.
- Saving vehicles from repossession — Chapter 13 bankruptcy is often used to stop finance companies from repossessing your vehicle. All overdue payments and outstanding balances will be consolidated into Chapter 13 repayment.
How Can Chapter 13 Bankruptcy Help?
While it is possible to consolidate your debts through a credit repair company, keep in mind that Chapter 13 bankruptcy is the only true method of debt consolidation and elimination. Not only can it give you the necessary time to repay your debts, but it will also grant your several governmental protections against debt collectors.
With a Chapter 13 bankruptcy, you create a payment plan that is affordable and reasonable based on your income. This allows you to get back on track by paying off your debt each month for the next three to five years. After that period, any unpaid and unsecured debt may be able to be discharged. There is hope.
Of course, just like Chapter 7 bankruptcy, Chapter 13 bankruptcy has strict rules about who does and does not qualify. Please reach out to our bankruptcy law firm today to discuss your specific situation. Sanchez Garrison & Associates, LLP is here to help.
We would be happy to provide legal counsel to anyone interested in learning how declaring bankruptcy could help their situation. Get in touch with a bankruptcy attorney now for your free case evaluation.
Debt Reorganization and Repayment
The main aspect of your Chapter 13 bankruptcy case is your new debt repayment plan that will be proposed to both your creditors and the court. This plan must include all your debts and can be made with our assistance. Even if you carefully consider your plan, the creditors will have the ability to object. However, if you can make a plan to everyone’s satisfaction, it will likely be approved. Payments begin the month following your filing.
You will need to repay the following if you choose Chapter 13 bankruptcy:
- Priority debt — Priority debts include child support, tax obligations, and alimony arrearages.
- Secured debt — You can usually keep your car or house, but you will need to keep paying on your car loan or mortgage. The court decides whether these amounts will be included as part of your plan or not.
- Unsecured debt — This plan applies your disposable income and allowed living expenses toward debts such as credit card balances or medical bills. In some cases, you will not need to fully repay these debts or even pay them at all, assuming that you can show you are putting remaining income toward their payment.
- Value of nonexempt property — If you can afford to do so, you are allowed to keep all your property in a Chapter 13 bankruptcy.
Do I Qualify For Chapter 13 Bankruptcy?
If you are considering filing for chapter 13 bankruptcy, we always recommend consulting a bankruptcy attorney like Sanchez Garrison & Associates, LLP in Baltimore. Consulting a bankruptcy attorney gives you peace of mind because you are working with a professional who has seen situations like yours before and can offer trustworthy advice. Initial consultations are often free of charge. However, some of the common requirements of filing for chapter 13 bankruptcy are:
- Paying fees such as:
- Filing fees ($235)
- Administrative court fees ($75)
- Providing detailed information surrounding:
- All properties that you own
- All leases and legal contracts under your name
- A detailed monthly budget outlining all income and monthly expenses that can account for every dollar earned and spent monthly
- All tax information and legal forms for the previous year
- Your exempt debt (mortgages, car loans, etc.) must not exceed $1,184,200
- You must not be a business owner or proprietor in order to qualify for chapter 13 bankruptcy
- You must be able to show that you have a steady income and have the ability to make payments every month toward your various debts
If you have any questions or are unsure whether or not you qualify for chapter 13 bankruptcy, contact us at Sanchez Garrison & Associates, LLP.
What Are The Drawbacks Of Filing For Chapter 13 Bankruptcy?
While chapter 13 bankruptcy might be the right solution for you, it is not without its drawbacks. Should you successfully file for chapter 13 bankruptcy, it will show on your credit score for up to seven years depending on how diligent you are with your repayment plan. Having bankruptcy show on your credit report makes it nearly impossible to obtain any loans or credit. More often than not, your agreement will prohibit you from even trying to obtain new credit except for in certain circumstances. If you do manage to receive a loan or line of credit for whatever reason, you will most certainly have an interest rate that is very high.
Additionally, if you and your bankruptcy lawyer are successful in applying for chapter 13 bankruptcy, your credit score will drop. Every situation is different and will impact your score a different amount. The range that your credit score will drop by is typically between 25 and 125 points, though it varies on a case-by-case basis.
After filing for chapter 13 bankruptcy, you will also have to pay back your debts over the next three to five years depending on what was agreed upon at your hearing. If you fail to make your payments on time, or at all, there are serious consequences. You may be required to sell your assets like your home, vehicle, or other important property in order to pay off the debts, and you will likely have to go back to court to have your agreement reviewed.
For more information on chapter 13 bankruptcy, get in touch with a Baltimore bankruptcy attorney at Sanchez Garrison & Associates, LLP.