Chapter 13

Chapter 13 bankruptcy is a repayment chapter. In Chapter 13 bankruptcy, you must propose a chapter 13 plan, which proposes to pay some or all of your debts.  In Chapter 13 bankruptcy you must make monthly plan payments to a Chapter 13 trustee. The chapter 13 trustee then distributes your payments to your creditors, according to your proposed plan.

Although Chapter 13 bankruptcy is a debt repayment plan for individuals, repayment of unsecured debt (such as credit cards or medical bills) can be anywhere from zero to 100% of the total unsecured debt. In Chapter 13, the consumer must file a Chapter 13 plan, which needs to be approved by the Court.

Chapter 13 bankruptcy is a great tool for people who got behind their monthly payments on their home or vehicle, to catch up on their payments and at the same time reorganize their household debts and finances. Few examples where chapter 13 may be most beneficial are as follows:

1. Foreclosure – If you are facing a foreclosure on your home, than the filing of the Chapter 13 bankruptcy, in most cases, will stop the foreclosure.  In your Chapter 13 bankruptcy plan, you may propose to cure the mortgage default over a period of several years, while at the same time you are able to resume your regular mortgage payments.

2. Vehicle repossession – the filing of the chapter 13 bankruptcies will stop, in most cases, vehicle repossession proceedings.  In your Chapter 13 bankruptcy plan, you may propose a more affordable vehicle payment, by reducing the interest rate attached to the vehicle loan and by stretching the loan over a period which is longer than the contractual period.  If the vehicle was purchased more than 910 days prior to the bankruptcy,  that you may be able pay the value of the vehicle only and not the balance of the vehicle loan.

3. Junior mortgages stripping – If the balance of your first mortgage exceeds the value of your real estate, than you may propose to strip your junior mortgage of your property without paying it. In recent years this option became less available, as most properties in the bay area now carry equity.

4. Mortgage Modification Mediation program – The U.S. Bankruptcy Court for the Northern District of California implemented a Mortgage Modification Mediation Program (“MMMP”). The MMMP is a good option for people who are seeking, as part of their chapter 13 bankruptcy, to modify the mortgages against their real estate. As part of the MMMP, the Court is issuing an order referring the borrower and the mortgage servicer to a mediation, which allow the borrower to seek a modification in supervised setting. Statistics show that the chances of obtaining a loan modification through the MMMP are much higher than outside the MMMP.

5. Tax wage garnishment and bank levy – Priority taxes, which include for example income taxes debt from recent years, are not dischargeable in bankruptcy. The filing of the Chapter 13 bankruptcies will stop, in most cases, wage garnishment and bank account levy by the IRS and the California Franchise Tax Board. In your chapter 13 plan, you may propose to pay the priority debt over a period of several years and get rid of the priority tax debt

 

Filing for bankruptcy is a serious matter. It is not a do-it-yourself project.  It is very important to get a proper legal advice and competent representation from a qualified bankruptcy attorney. .I will be happy to provide a free initial consultation in order to determine if Chapter 7 bankruptcy is right for you.