Chapter 13 Bankruptcy is sometimes referred to as “Personal Reorganization.” Chapter 13 Bankruptcy allows the debtor to propose a repayment plan to creditors, payable over three to five years. Creditors have limited say in whether the plan is approved, however, it must be approved by the Bankruptcy Court in order to be confirmed.
Chapter 13 Bankruptcy is available to individuals and families who have valuable non-exempt assets that would otherwise be lost in a Chapter 7 Bankruptcy. It is the perfect solution for homeowners who either have equity in their home or have fallen behind on their mortgage.
Filing Chapter 13 Bankruptcy can prevent foreclosure and allow individuals and families to repay mortgage arrears over a three to five year period.
Homeowners can literally stop a foreclosure proceeding dead in its tracks and force the bank to accept the repayment schedule outlined in the Bankruptcy plan. Filing Chapter 13 Bankruptcy is sometimes seen as a last resort for homeowners in foreclosure.
Filing Chapter 13 Bankruptcy is not a last resort.
It is a powerful alternative to mortgage modification and takes the ball out of the hands of the mortgage bank and puts it into the hands of the homeowner.
You can remove or modify subsequent mortgages in Chapter 13 Bankruptcy.
If the current fair market value of your home falls below the outstanding balance on your first mortgage, additional mortgage liens can be “stripped” or “crammed down.” The second (and sometimes third) mortgages on your home will be reclassified as unsecured debt.
At the completion of your Chapter 13 Bankruptcy plan, additional mortgage liens will be removed from the property.
For those individuals and families who do not qualify for Chapter 7 Bankruptcy because of their income, Chapter 13 Bankruptcy is still available.
In fact, Chapter 13 Bankruptcy is designed for individuals and families who have steady income and want to repay their debts. In many cases, debtors can still get rid of a large percentage of their unsecured debt by only paying a percentage of the total amount owed.
It is not uncommon for people to pay back less than 30% of their total unsecured debt in Chapter 13 Bankruptcy. Monthly payments are based on what you can afford and at the end of the repayment plan (usually sixty months), the remaining debts are wiped out.
Chapter 13 Bankruptcy is Better Than Debt Consolidation.
In many ways, it is similar to debt consolidation, however, you are not subject to the fees charged by private debt consolidation companies. Many debt consolidation companies will make sure their fees are paid first before applying your payments to your debts.
Many creditors will not work out payment arrangements or settlements on debts that are current. In order to work out a payment plan or a settlement, many creditors require you to fall behind and further damage your credit. In addition, many creditors refuse to work with debt consolidation companies.
Creditors are forced to accept the terms of the Chapter 13 Bankruptcy repayment plan and you are provided all of the protections of the Bankruptcy Laws.
Whatever your reason for filing Chapter 13 Bankruptcy, it will certainly solve your debt problems and protect you as efficiently as Chapter 7 Bankruptcy.
*It is important to understand that the above information highlights only some of the procedural aspects to a Chapter 13 Bankruptcy Case. For more information and for a full evaluation of your case, please contact my office to schedule a free consultation.