Who Should File Chapter 13 Bankruptcy?

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Many people think of bankruptcy court as the final stop on a path to financial ruin, the only option left when repaying debts seems impossible. But there’s hope even in bankruptcy, and Chapter 13 of the federal bankruptcy code offers the closest thing to a soft landing.

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Sometimes called the Wage Earner’s Bankruptcy, Chapter 13 allows those with enough income to repay all or part of their debts an alternative to liquidation. It’s bankruptcy for those whose biggest problem is dealing with creditors’ demands for immediate payment, not lack of income.

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One of Chapter 13’s most attractive features is the chance to keep your home as long as you can pay the mortgage under a settlement plan.

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Under Chapter 13, people have three to five years to resolve their debts while applying all their disposable income to debt reduction. The option allows applicants to eliminate unsecured debts while catching up on missed mortgage payments. Short-circuiting home foreclosure is one of the option’s most attractive features. Though keeping your home can be a major relief, you’re required to spend years living under the supervision of a court-appointed trustee who will collect and distribute your payments.

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How Chapter 13 Works

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Chapter 13 bankruptcy is like Chapter 11, which applies to businesses. In both cases, the petitioner submits a reorganization plan that safeguards assets against repossession or foreclosure and typically requests forgiveness of other debts. They both differ from the Chapter 7 filing, which liquidates all assets except those specifically protected.

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No bankruptcy filing eliminates all debts. Child support and alimony payments aren’t dischargeable, nor are student loans and unpaid taxes.

 

Filing a Chapter 13 petition suspends any current foreclosure proceedings and payment of any other debts owed. This buys time while the court considers the plan, but it does not eliminate the debt. Hopefully, the bankruptcy plan will free enough of your income that you’ll be able to make regular mortgage payments.

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The Chapter 13 Process

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Chapter 13 petitioners must stipulate that they haven’t had a bankruptcy petition dismissed in the 180 days before filing due to their unwillingness to appear in court. Also, anyone seeking bankruptcy protection, must undergo credit counseling from an approved agency within 180 days of filing a petition.

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Shortly after filing, the debtor also must propose a repayment plan.  A bankruptcy judge or administrator will hold a hearing to determine whether the plan meets the requirements of the bankruptcy code and is fair. Creditors may raise objections to the plan, but the court has the final say.

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Debtors can arrange to make up delinquent payments over time, but under Chapter 13 rules, all new mortgage payments from the time of filing must be made on time.

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The debtor is not required to have any direct contact with his or her creditors under Chapter 13. In fact, all creditors are required by law to cease any attempts to recover the debts covered under the Chapter 13 process if all terms of the agreement are being met.

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You must stick to the basics of your settlement. No late payments are permitted. You’ll be allowed to accelerate your payments, allowing you to seek an early discharge from the agreement. Conversely, if your financial situation worsens, it’s up to you to inform the bankruptcy trustee and seek a modification of the plan, if necessary. Failure to comply with the terms, especially failure to make payments on time, could result in you case being dismissed.

 

Working with a bankruptcy lawyer is an incredible opportunity to discharge debts and experience a fresh start for your financial life. A bankruptcy lawyer has the expertise to maximize your rights and benefits reaped from a Chapter 13 filing. The bankruptcy attorneys at the Guerami Law Firm can provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances.

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Visit https://www.GueramiLaw.com or call (305) 432-3503 / (954) 953-1717 to get the answers you want, and the financial relief you are looking for.