Chapter 13
Chapter 13 of the United States Bankruptcy Code provides individuals with protection from financial stressors by providing an opportunity for the debtor to restructure financial payments over time. It gives the debtor an opportunity to reorganize or restructure debt. Under Chapter 13 Bankruptcy, a debtor is given the ability to propose a plan to creditors and the Court, explaining the steps that will be taken to pay of all or some debts within a three to five year time-frame. This form of bankruptcy permits the elimination of some debt, but the repayment others. An important aspect of a Chapter 13 Bankruptcy is that it allows the filer to keep valuable property. It can help with the payment of back taxes, assist the debtor in catching up on missed mortgage or car-note payments, and prevent repossession of a vehicle or the foreclosure of a home. At the conclusion of the repayment term, if the debtor is able to keep up with all payments, all remaining dischargeable debt will be released.
McKinley Onua attorneys will guide you through the process of understanding your financial goals, determining your eligibility for Chapter 13 Bankruptcy, and implementing a plan that is best for you. We will walk you through each step of the process to ensure that you are knowledgeable and comfortable with your repayment plan. In addition, we communicate with your creditors on your behalf to ensure that all debt collection activity ceases the moment we file your case.
Eligibility/Requirements
To be eligible for a Chapter 13 Bankruptcy, a debtor will be required to show proof of the following:
- Debtor must be current on all tax return filings;
- Debtor must have a regular source of income, as well as disposable income that would go towards the repayment plan;
- Total debt must be within limitations.
Benefits of the Law
- Most unsecured debt can be discharged
- It allows the debtor to create a plan detailing how debt will be repaid.
- Interest will stop accruing on most debts, such as credit card debts, as soon as the Chapter 13 bankruptcy case is filed.
- Creditors are required, by law, to halt any efforts on their part to repossess items or otherwise demand payments from the debtor.
- In certain circumstances, filing Chapter 13 stops foreclosure or eviction proceedings.
In addition, if the debtor’s home has no equity (the first mortgage balance exceeds the current fair market value of the home), the debtor may have the ability to remove a second mortgage in a Chapter 13 bankruptcy proceeding (a lien strip).
While secured loans — loans that are guaranteed by the pledge of an asset such as a car or a house —must be paid back in full, unsecured loans, such as credit card debt, may be eligible for a significant reduction of the amount owed.
A person who files a successful claim under Chapter 13 bankruptcy is able to retain all property categorized as exempt.
Chapter 13 bankruptcy is also utilized by homeowners who need some time to pay back past due mortgage payments through a court-regulated payment plan.
The Chapter 13 Bankruptcy can also stop a foreclosure proceeding.
