frequently asked questions

 

The following section is meant to be for general knowledge only. Specific questions about your situation should be discussed with an attorney before you make any decisions. Please call me now for a free constulation: 888-755-2559

 

• What does Ch 13 bankruptcy do for me?
• How does Chapter 13 work?
• Does the trustee pay all my bills?
• How long does a chapter 13 take?
• What if I don't own a home?
• What about back taxes?
• What are the pitfalls in a chapter 13?
• What do I do next?

What does Ch 13 bankruptcy do for me?

Chapter 13 bankruptcy is designed to stop your creditors from taking any action against you while we come up with a plan to repay some or all of your debts. This is quite different from a chapter 7 because you are not just walking away from your debts. This is the preferred chapter if you are behind on your mortgage but you want to try to save your home. As long as you follow the terms of your plan, your creditors must leave you alone.

How does Chapter 13 work?

In order to propose a successful plan to the bankruptcy court we must take an in depth look at your finances, your current bills, and the future payments on your mortgage. Once we have a clear idea of your income and expenses we determine how much you can afford each month to pay toward the arrears on your debts. Don’t be alarmed if you think you don’t have any money to fund the plan. Many of your other debts will be put into the plan so that you do have some disposable income each month to pay toward the plan. These include back HOA’s, real estate taxes, state and federal taxes, vehicle loans, student loans, back child support, personal loans, medical bills and credit card debt. Once we have developed a feasible plan we file your case and let your creditors know what you intend to do. They have time to review your plan and file any objections if they think it is unworkable or it violates the provisions of the code. Your attorney works with your creditors and the trustee to come up with a solution that works for everyone. Remember, everyone WANTS you to be successful in a chapter 13. Your lender doesn’t want to foreclose on the house or repossess your car. Credit card companies don’t want to go away empty handed and the trustee gets paid a percentage of everything he doles out to your creditors. Eventually the court will approve your plan. From there you just make one monthly payment to the chapter 13 trustee and he pays your creditors each month on a pro rata basis.

Does the trustee pay all my bills?

No. The trustee is only paying your creditors those past-due bills we put into the plan and some types of car payments. You must resume normal payments on your mortgage, future property taxes, utilities and other normal monthly expenses. We don’t want to put too much into your plan because the trustee is getting a fee for what he pays on your behalf. The more he pays … the more YOU pay.

How long does a chapter 13 take?

Plans can take anywhere from 3 to 5 years. At the end of your plan the court will enter a discharge which wipes out any remaining unsecured debt that was not paid through the plan. So, let’s say your plan payment is $530 a month for 36 months. At the end of the 36 months your arrears on your mortgage has been paid in full but only 45% of your unsecured debt has been paid. The remaining 55% will be discharged and you never have to pay that.

What if I don’t own a home?

Chapter 13 is also a great way to deal with huge balances on older cars. You can only be required to pay back the actual fair market value of the car if you bought it more than 910 days (2 ½ years) prior to filing your case. If you bought it with little down and a large interest rate this may be a great option for you. Some people are not comfortable filing chapter 7 and walking away from all their debt. This is a way to pay back some of what you owe and discharge the portion you feel you just can’t pay. Finally, under the new law some people make too much money to be allowed to file chapter 7 and they are required to file chapter 13.

What about back taxes?

This is also a great way to deal with unpaid tax liabilities that cannot be discharged. The only prohibition is that usually your nondischargeable taxes must be paid in full by the end of the plan. If your plan does not provide for this it will never be confirmed.

What are the pitfalls in a chapter 13?

Being stuck in a repayment plan for 5 years can be tough for some people to swallow, especially if you have a large plan payment. All of this will be explored during your consultation and plan preparation. You are required to make your plan payments each month and if you fall behind your trustee can ask the court to dismiss your case. If that happens you may be right back where you started. However, if you stay in contact with your attorney and keep me apprised of anything that changes in your financial situation during the plan we will have ample opportunity to propose a new plan that reflects your new situation. You also have the right to convert your case to one under Chapter 7 for a small fee if your new circumstances support that.

What do I do next?

Make an appointment with me to review your case and help you determine what, if any, bankruptcy remedy is appropriate for you. It may turn out that trying to save your home is an emotional choice that makes no financial sense. Sometimes it is hard to see that when it is your home on the line. I’ll help you take an objective look at your situation and we will come up with a solution that makes sense for you.
Don’t wait until it is too late!
Make an appointment now by calling 888-755-2559.