Chapter 13 – Repayment Plan

Repay your creditors (in full or in part) on your terms …, not theirs

“The principal purpose of the Bankruptcy Code is to grant a “fresh start to the honest but unfortunate debtor.”                — United States Supreme Court

If you want to:

  • Stop a foreclosure and keep your house …
  • Stop the repo man and keep your car …
  • Stop the IRS from taking your property …
  • Stop the family court from threatening to put you in jail for back alimony or child support payments …
  • Stop a wage garnishment and work out a payment plan on your terms …

a Chapter 13 is for you!

What is a “Chapter 13”?

Chapter 13 is basically a Federal court-enforced repayment plan where you agree to repay some or all the amounts that you owe over a 3 or 5 year period, depending upon your income. Unlike a Chapter 7, in a Chapter 13 you get to keep all of your property and, in addition, you also benefit from the automatic stay that stops your creditors from chasing you.

How Will a Chapter 13 help?

A chapter 13 will help you in many situations. For example, you can

  • Save your home from foreclosure – If you are more than 60 days behind on your mortgage and the lender is threatening to foreclose, you can use a Chapter 13 to stop the mortgage company from foreclosing on your house and force them to accept your delinquent payments over a lengthy period of time in order to get current. (You still have to make all of the regular payments). Please note that a Chapter 13 MUST be filed BEFORE the Sheriff’s sale in order to accomplish this. Thus, timing is essential!!
  • Get rid of a second mortgage or other liens – If your house is worth less in fair market value than you owe on a first mortgage and you have a second mortgage or home-equity line of credit, you can use a Chapter 13 to avoid the liens in excess of the actual value of the property and not have to make payments on them.
  • Avoid liens on other properties (such and vehicles in excess of the fair market value of the property – If you a second property that is “underwater” (such as a rental property or vacation home) or owe more on your car, truck, RV, or boat that it is worth, you can use a Chapter 13 to avoid having to pay more than the actual value of the asset and lower your monthly payments.
  • Stop repossession and keep your car or other property (or get it back if it was just repossessed) – If your creditor is threatening to repossess your car or other property, you can stop them by filing a Chapter 13 which will allow you to repay the amount you ower or the actual value of the property (whichever is less) over a three to five year period.
  • Stop the IRS from garnishing your wages, filing liens or seizing your property – If you owe back taxes and the IRS is threatening to file a lien against your house, levy your wages or seize your property, you can use a Chapter 13 to stop them and force them to accept a long-term repayment plan on non-dischargeable debt and, in some cases, discharge the remaining amounts due.
  • Catch up on back alimony or child support payments – If the family court is chasing you for back spousal or child support payments, you can use a Chapter 13 to allow you to catch up on these amounts over a long period of time and avoid consequences, such as jail time, for failing to timely make these payments.
  • Consolidate and discharge debt – If you have a lot of unsecured debt such as credit cards and medical bills, you can use a Chapter 13 plan as a consolidation loan where you can make a single monthly payment that you can afford — with the balance getting discharged at the end of 3 or 5 years. During this time you are protected from your creditors who are legally prohibited from calling you, harassing you or attempting to seize your property or garnish your wages.

What Are The Other Advantages Of A Chapter 13?

In addition to all of the things that you can accomplish by filing a Chapter 13, there are also other benefits such as:

  • Automatic Stay Protection – The biggest benefit of any bankruptcy is the protection that you get from the “automatic stay”. This means that at the moment you file a Chapter 13 petition, all of your creditors must immediately stop trying to collect from you — even if they don’t yet know that you filed. This means that a mortgage company cannot foreclose, a car loan company cannot repossess your car and no one can sue you or continue a civil lawsuit against you. If any of creditors ignore the bankruptcy stay, you can even sue them and collect money from them.
  • No Tax Consequences – Unlike a “debt settlement” or “debt negotiation,” where you settle with a creditor for less than the total amount owed and then have to pay income tax on the amount that is “charged off” or “forgiven” (after they send you a Form 1099 notifying the IRS of the “charge off”), you cannot be charged income tax on a debt that was discharged in bankruptcy.
  • Flexibility – A Chapter 13 is a voluntary repayment plan that will provide you with a lot of benefits. However, if your economic circumstances change (such as an increase or decrease of income or expenses), you have the right to modify your plan, convert to a straight Chapter 7 or dismiss your case if it is no longer working for you.

Do I qualify for a Chapter 13?

If you are a person who has regular income (for example wages, self-employment income, a pension, income from a business, or social security) then you likely qualify to file a Chapter 13 as long as:

  • your unsecured debts (such a credit cards, medical bills and the amount that you owe on a house in excess of the value of the house) are less than $394,725*; and
  • your secured debts (such as the amounts of for a mortgage or car purchase [not a lease]) are less than $1,184,200*.
  • you did not have a previous bankruptcy case dismissed within 180 days you’re your failure to comply with bankruptcy court orders or after your creditors sought relief to recover property that was liened.

Additionally, prior to filing a Chapter 13 you must take an approved “credit counseling course”, which can be done online or via telephone in about an hour or less from the comfort of your home.

* = these amounts are as of April 1, 2016, are adjusted every three years.

What do I need to do to file Chapter 13?

If you want to take advantage of the benefits of a Chapter 13 that are described above, you need to immediately pick up the phone and call our office at 248-417-9800 or contact us online to set up an appointment for a FREE, no obligation, confidential consultation to discuss your financial situation, and get the process started by crafting a plan that reflects your specific financial goals. Waiting is not going to make the problem go away — it will just make it worse. That’s why we urge you to call us RIGHT NOW — so that you can get the “fresh start” that you deserve — as soon as possible. Our phone lines are available 24 hours a day, at 248-417-9800. We look forward to hearing from you.