In general, Chapter 13 is most appropriate for people who have fallen behind on payments for secured loans such as their home mortgage or a car loan. It is also useful for people who may be eligible for Chapter 7 but who do not want to surrender property or assets that Chapter 7 will not allow them to protect. A number of other factors can also be involved in making this determination. Besides a mortgage, under certain circumstances, it is possible to rewrite certain secured obligations, including on vacation homes, cars, trailers, boats and other collateralized obligations.
What Can Chapter 13 Do?
Chapter 13 can stop foreclosure. It can stop repossession. It can give you the opportunity and breathing room you need to get your financial house in order. Our office has worked with clients on three-year plans, five-year plans and on lump-sum payment plans accomplished through real estate sales or refinancing. More importantly, we stay with you through the process until it’s complete — even if it takes the full five years.
How Does a Chapter 13 Bankruptcy Work?
As with Chapter 7, an automatic stay goes into effect once you file your Chapter 13 bankruptcy petition. This will put an immediate stop to collection actions such as foreclosure, car repossession, wage garnishments and harassing phone calls. Along with your petition, you also submit a repayment plan that details your assets, debts, current income, expenditures, reasonable living expenses and the disposable income you expect to have available each month. Every plan, at a minimum, must provide enough money to pay priority debts such as child support or recent tax debts in full. Using our own software, we develop creative plans that allow you to maintain a standard of living while repaying what you can afford.
However, the trustee appointed to oversee your case must approve any plan. If the trustee confirms your plan, your first payment must be made within 30 days of filing the petition. These payments must continue as scheduled even if creditors challenge the plan. For the duration of the plan, you need to make payments on time or provide the earliest possible notice of a problem, get the approval of the court before incurring any significant new debt, pay your taxes and keep current insurance on any asset that is collateral for a debt (homes and cars, generally). Our firm will be available to help if any issues come up during this time that will prevent you from making scheduled payments or that will require a modification to the plan.