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| Chapter 13 allows you to keep all your property and pay debts over time A Chapter 13 bankruptcy is an adjustment of the your financial affairs and, unlike a Chapter 7, does not involve a liquidation of your non-exempt assets. With our assistance, you will propose a plan for payment of some or all of your debts and the plan is carried out under court supervision. A Chapter 13 repayment plan allows you to consolidate your debts and make interest-free payments on your debts over a 3 to 5 year period. If you earn more than the median income for a household of your size, or have more equity in your home or other valuable assets than the permissible exemption amounts, this is likely the more appropriate chapter to file under in the Bankruptcy Code. Your assets will not be liquidated. Having a regular source of income makes you eligible for Chapter 13 This chapter of the bankruptcy code is available to you if you earn a regular income - whether that be wages or from other sources. You must be working or have a consistent source of income for your repayment plan to be approved by the court. You will have to be able to pay for your monthly living expenses as well as make payment to the court to pay your consolidated debt. Your Chapter 13 repayment plan dictates how much you will pay your unsecured creditors We perform a calculation in accordance with federal law to determine the amount of “disposable income” you are deemed to have available to commit to a Chapter 13 repayment plan. Your "disposable income" may in fact be zero or it may be a significant sum of money depending on your circumstances. Thus the percentage of the unsecured debts you pay under your plan may range anywhere from zero to 100 percent. A “zero” or “low percentage” plan is a way for you to pay little or no money to unsecured creditors in order to divert cash flow to repay secured debt. Your plan will be either three or five years in length; five years if your "annualized current monthly income" exceeds the median family income for your household size in New York State. While you are fulfilling a Chapter 13 debt repayment plan, creditors cannot make any efforts to collect from you and they are required by federal law to adhere to the terms of the plan. Types of debts that can typically be consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other unsecured debts. All your outstanding debts must be included in the Chapter 13 bankruptcy consolidation. You must make your first payment under the plan to the trustee no later than 30 days after your petition has been filed. Your chapter 13 plan must meet certain general requirements, including: • Priority claims, such as most unpaid taxes, domestic support obligations, unpaid wages and certain debts incurred as a result of a DWI conviction must be paid in full. • Unsecured claims must be paid in an amount that is at least equal to the present value of that which you would have had to pay in a Chapter 7 liquidation. (This means that if your home is the sole asset available to the Trustee to pay unsecured creditors, you will have to pay your unsecured creditors a sum equal to the amount by which the value of your home exceeds the sum of the unpaid mortgage and your exemptions.) • Secured claims almost invariably have to be paid in full and any liens on the property securing the claim stay in place. (Lien amounts that exceed the value of the collateral, however, may be "stripped off" and treated like unsecured claims.) Alternatively, you must surrender the collateral to the creditor. • If an interested party objects to the plan, you will have to commit all of your disposable income for either 3 or 5 years depending on the length of the plan. The length of the plan and the amount of income which is deemed disposable is, at least initially, determined by application of a formula contained in a Official Form 22C called the "Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income." The Automatic Stay stops all collection activity Stop Foreclosure Immediately If your home is presently in foreclosure or you are in danger of being foreclosed on, a Chapter 13 bankruptcy filing will stop the foreclosure action any time prior to the sale of the home. You may then be allowed to repay your mortgage arrears through your Chapter 13 plan so long as you can afford to keep current on all future mortgage payments. You will make all future mortgage payments directly to the mortgage company. The mortgage company may not foreclose to collect any outstanding mortgage payments while your bankruptcy is pending without obtaining permission from the bankruptcy court. We may, in fact, be able to negotiate lower monthly payments with your mortgage company through participation in the bankruptcy court's "loss mitigation" program. The term “Loss Mitigation” captures a full range of solutions that may avert either the loss of your home to foreclosure, increased costs to the lender, or both. Loss mitigation commonly includes of the following general types of agreements: loan modifications, loan refinance, forbearance, short sales, or surrender of the property in full satisfaction. The terms of a loss mitigation solution will vary in each case according to the particular needs and goals of the parties. For more information on loss mitigation click here. Save Your Car A Chapter 13 bankruptcy will also stop a finance company from repossessing your car. If you purchased the car more than 910 days (2 1/2 years) ago, you can "cram down" the amount owed on the vehicle into the plan at market rate rather than the actual amount owed. Your past due payments together with the remaining balance on your vehicle loan can be consolidated with your other debts and you will be permitted to pay off the consolidated amount over the next three to five years. Only one payment is made, and that is to the Chapter 13 trustee. We may even be able to recover your vehicle after repossession and consolidate the remaining balance. Consolidate Student Loans Student loans, barring exceptional circumstances, may not be discharged in a Chapter 7 bankruptcy. You can, however, stop collection efforts and consolidate them with your other bills in a Chapter 13 bankruptcy. We will ensure that collection action and garnishments related to student loan debts cease and we will consolidate your bills so that you may repay them in a plan that is feasible for you. Protect Cosigners Cosigners on your debts receive the same protection that you receive under Chapter 13 bankruptcy, unlike in a Chapter 7 bankruptcy which does nothing to protect your cosigners. We can protect your cosigners from collection activity by means of a Chapter 13 filing. If you are having trouble making payments we can consolidate your remaining balance inside a Chapter 13 bankruptcy and protect a friend or relative who cosigned on your vehicle or other debt. |
The information provided on this page
should give you an overview of a
Chapter 13 bankruptcy. It is not
intended, however, to give you legal
advice about your specific situation.
You should seek legal consultation
prior making any decisions about how
to proceed.
should give you an overview of a
Chapter 13 bankruptcy. It is not
intended, however, to give you legal
advice about your specific situation.
You should seek legal consultation
prior making any decisions about how
to proceed.