For those who do not qualify for Chapter 7 or for those trying to save their home from foreclosure may be able to file a Chapter 13, which is commonly known as “reorganization”. A Chapter 13 typically lasts only from 3 to 5 years and consists of the debtor making regular monthly payments to the Trustee assigned to his or her case. The most common question is “What are my payments going to be?” Our skilled Attorneys will analyze your information and then determine the smallest payment legally possible. However, the actual amount of the payment will typically not be known until the debtor files for relief under Chapter 13. But, rest assured that the payment will not be more than you can afford. Our Attorneys will work with you to assess a fair and reasonable monthly budget. Typically, your payment to the Trustee will not exceed the amount that is left over each month, according to your budget.
Debtors payback creditors anywhere from 0% to 100% of outstanding unsecured debts, which typically include credits cards, most judgments, personal loans, and deficiency balances from repossessions or foreclosures. Chapter 13 allows debtors to pay creditors a monthly amount that is affordable. Interest and fees on unsecured debts stop to accruing as soon as a Chapter 13 is filed. At the end of your Chapter 13 term (3 to 5 years) any unsecured debts that remain are discharged and you walk away free from debt.
The advantage over Debt Counseling is that there is a guarantee of Federal debt relief. As long as the debtor complies with Bankruptcy law and fulfills all obligations under Chapter 13, at the end of the Chapter 13 plan a Debtor will be free from debt. In attempting Debt Counseling there is the risk that an unyielding creditor will not discharge the debt unless all or the majority balance is paid. Additionally, during bankruptcy you get protection of the “automatic stay” whereby generally creditors are disallowed from any collection action, such as lawsuits, garnishments, etc, while you are in bankruptcy – the debt relief agencies cannot provide this sort of guarantee legal protection. In addition, interest and fees continue to accrue and rack up. Don’t be fooled, a charge off or settlement on your credit can look as bad as a Bankruptcy.
Because of a loss of job, illness, sudden accident, or other unfortunate events, debtors may fall behind in their mortgage payments. Eventually the house is scheduled for foreclosure and the bank will not take any payment less than the full amount and refuse to work with the debtor. Chapter 13 can stop the foreclosure and give you time to catch up on the back payments. In addition, back payments on a car loan can also be included in a Chapter 13. Most vehicles will be paid in full by the end of your Chapter 13. Plus, some vehicles may qualify for a “cram down” which allows the debtor to pay only the current fair market value and not what is owed on the loan. Also, we may also be able to adjust the interest rate paid on vehicle loans, which may save you hundreds of dollars. Our Attorneys understand the law, which allows us to help you in the complicated world of Bankruptcy.
Eliminate Your Second Mortgage or Home Equity Line of Credit.
In a Chapter 13, some debtors qualify to “strip off” their Second Mortgage or Home Equity Line of Credit. Imagine having only your First Mortgage to pay. Plus, with most homes upside down (or underwater), meaning you owe more than the home is worth, homeowners need all the help they can get. While the news is spattered with talks of government rescue or loan modifications, it is mostly just talk. Most of these banks have received help or government assistance, but they will usually do very little for you. Some banks are willing to reduce interest rates and change variable mortgages to fixed, however very few will reduce the amount owed. For those who qualify, Chapter 13 forces second mortgages or home equity loans to be eliminated and treated as unsecured debt (similar to credit card debt). Currently, this is the best “bail out plan” for those hurt by the housing crisis.
Bankruptcy may not be the best solution in every case. We are not a “one size fits all” law firm. We have aggressive Attorneys to settle debts for those who have some assets or means to make settlements arrangement with creditors. Tax debts may also be settled for less than is owed by our Tax Attorneys’ relentless negotiation with the IRS or State. We have been successful at modifying mortgages for debtors that have fallen behind in their payments or who can no longer afford their mortgage payment. We explore all the options before we advise Bankruptcy.
Chapter 13 Bankruptcy