Chapter 13 Bankruptcy

How Chapter 13 Bankruptcy Can Help

Chapter 13 Bankruptcy can help you in reducing or even eliminating your debt. This can include credit card debts, medical bills, past-due utility payments, and certain types of loans. Once filed, an automatic stay will then be placed on your creditors. This will stop all harassing phone calls or other methods of debt collection.

Chapter 13 Bankruptcy can be especially beneficial if you are behind on your mortgage payment or have other secured debt. This is because Chapter 13 allows you to pay the debt through a Chapter 13 "plan" and then you can keep your home.

How Chapter 13 Bankruptcy Works

The Chapter 13 plan is a repayment plan that typically allows 3 or 5 years for repayment of debt. This will consolidate your debt into manageable monthly payments. The plan first accounts for your living expenses, and the rest is determined by the amount of income after those expenses are taken care of.

Chapter 13 is available only to you if you have a steady and regular income because you will be required to make monthly payments for 3 or 5 years after filing. If your have debt exceeding roughly $900,000 secured or $300,000 unsecured, you might be disqualified from filing Chapter 13 and might have to consider filing Chapter 7 or 11 instead.

The main reason most people select Chapter 13 is that they usually get to keep all of their property. Past due mortgage payments can also be paid through the Chapter 13 plan.

Debts Discharged in Chapter 13 Bankruptcy Only

A Chapter 13 bankruptcy discharge will allow you to eliminate certain debts, not dischargeable through Chapter 7 bankruptcy. Below are some of the most common examples of that:

  • Debts stemming from willful or malicious property damage
  • Nondischargeable tax obligations
  • Property settlement agreements through divorce or separation proceedings
  • Debts from a prior declared bankruptcy where the court denied your discharge
  • Loans taken from retirement accounts such as 401-K
  • HOA or condominium fees that were rendered due after your filing date
  • Certain penalties or fines owed to the government

Debts That Chapter 13 Doesn't Cancel

Chapter 13 does require you to pay off certain obligations in full through your repayment. Below are more about which debts are required to be paid back in full through the Chapter 13 plan.

Priority Debts

Some obligations (called priority debts) will receive special treatment in bankruptcy. Priority debts can't be eliminated by filing for bankruptcy. If you have priority obligations, they must be paid in full through your Chapter 13 repayment plan. Two of the most common types of priority debts are certain tax debts and child support obligations.

Home Foreclosure and Bankruptcy

The possibility of losing your home through a foreclosure can be terrifying. Fortunately, there are options available to you, and one of those options is a Chapter 13 bankruptcy. The foreclosure process will be halted immediately after filing, which will give you time to carefully evaluate your financial situation and plan your next steps. If you are behind on your mortgage and want to keep your house, you must pay off your mortgage debt through your Chapter 13 repayment plan. However, please be reminded that you must continue to make your current mortgage payments while also catching up on your arrears through the plan.

However, if you don't plan on keeping your house, then you don't have to include your past-due mortgage payments in your plan. You can then choose to surrender the home to the lender.

Car Loans and Other Secured Debts

If you want to keep your vehicle, you can add this to the repayment plan. However, you may opt to surrender your car and wipe out the loan. Whether you will be required to pay off your car loan or other secured debts through the Chapter 13 plan will depend on the rules of your jurisdiction. If you want to remain in possession of your vehicle, some bankruptcy courts will allow you to leave t out of your repayment plan and continue making payments directly to your lender. However, certain jurisdictions might require you to add your car loan to the repayment plan and pay it off that way.

Rebuild Your Credit After Bankruptcy

The stigma of filing bankruptcy is one of the most common concerns that we hear from clients. But there is reason to have hope because the ability to reestablish your credit after a bankruptcy is better now than it has ever been. Although bankruptcy can remain on your credit report for up to 10 years, you can start reestablishing your credit immediately and restoring your good name.

Find Relief From Debt Today

At Mark Morales & Associates, we will work together with you and create a plan that could save your home and your peace of mind. This might involve working with your lender to lower interest rates and arranging a payment restructure. Call today and to an attorney today at (512) 930-5511 for a free consultation. Let us lighten your burden and help you regain peace of mind.

Contact the offices of Mark Morales & Associates to speak with an expert and to schedule your consultation.

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