What is Chapter 13
Chapter 13 bankruptcy is a consolidation of all of your debts into one payment plan. You do need to list all of your assets, debts, income, and expenses when filing Chapter 13 bankruptcy. Your Chapter 13 will include all of your debts in a Chapter 13 Plan. That Chapter 13 Plan will propose what you intend to pay to each creditor. Generally that plan will last close to five years but some plans can be shorter in certain circumstances. In Chapter 13 you will make one monthly payment to an individual called the Trustee and the Trustee's office will make the required payments to your creditors. Generally you will not have to pay all of your creditors in a Chapter 13 bankruptcy. You will only have to pay the creditors that the law requires you to pay. Many Chapter 13 Bankruptcies are filed on an emergency basis to stop foreclosures and repossessions. The Roach Bankruptcy Center can file your case fast even when you need to file in an emergency.
Stopping Foreclosure on Mortgages
Chapter 13 bankruptcy is the type of bankruptcy that you would file if your home is in foreclosure and you want to keep your home. Chapter 13 bankruptcy will stop the foreclosure of any real estate that you own including your principal place of residence. If you wish to keep your home or any real estate you will generally have to pay the regular monthly mortgage payments each month in the payment to the trustee. If you no longer wish to keep your home or other real estate then you may choose to surrender that real estate to the creditor in lieu of paying the debt to the creditor. Chapter 13 bankruptcy cannot alter the terms of a mortgage contract which secures your principal place of residence. What that means is that the court cannot force the mortgage company to lower your mortgage payments if it is your principal place of residence. In addition to the regular monthly mortgage payments, you will need to pay all of the missed mortgage payments over the five year plan. There are some exceptions to this general rule. (1) If your mortgage is due to be paid in full during the Chapter 13 Plan then you will be eligible to spread out the entire mortgage over the 5 year plan and pay a portion each month. (2) If your mortgage is attached to real estate which is not your principal place of residence then you would be eligible to pay the value of the mortgage if it is less than the amount of the mortgage. In this case you will be required to pay the entire mortgage during the 5 year plan. (3) If you have junior mortgages, meaning you have more than one, and the amount of your first mortgage is more than the value of your home, then you will be entitled to "strip off" any junior mortgages. In this instance you would not be required to pay the junior mortgages so long as you complete the Chapter 13 Plan. At the free initial consultation with the Roach Bankruptcy Center we will go over all of the mortgages that you have and determine what you are eligible to do with them.
Secured Debts on Vehicles and Other Personal Property
Chapter 13 is designed to stop a creditor from repossessing your vehicle. If you wish to keep a vehicle or any other personal property that is collateral for a loan then you will need to propose to pay for that vehicle or property in the Chapter 13 Plan. In some circumstances, you would need to pay the entire balance of the vehicle or property during the 5 years of the Chapter 13. However, in other circumstances, you would only be required to pay the value of the vehicle or other property at the time you filed the case. The legal term for paying on the value of the vehicle is called a "cram down" because you are cramming what is owed down to the value. Generally, the interest rate on all vehicle loans will change to a local rule rate of interest called the "Chapter 13 Rate". The "Chapter 13 Rate" changes every six months and your rate will be determined as of the date you file the Chapter 13. If you do not wish to keep a vehicle or other collateral then you may choose to surrender that asset in lieu of paying the debt to the creditor. At the free bankruptcy consultation with the Roach Bankruptcy Center we will discuss any secured debts you have, How much you will have to pay them, and what your interest rate will be.
In Chapter 13 bankruptcy you must pay all of your priority debts. Priority debts mostly just consist of Taxes and Domestic Support Obligations that you owe on the date of filing. If you have a tax that you owe on the date you file for Bankruptcy then that tax must be included in your Chapter 13 Plan. Most of the time your tax debts will be priority debts and will need to be paid in the Chapter 13 Plan Payments. This includes income taxes, sales taxes, real estate taxes, personal property taxes, or any other taxes. It is possible that you could have a tax lien and then the tax would be listed a secured debt. It is also possible that not all of your taxes will be required to be paid during the Chapter 13. That depends on many factors such as what type of tax, how old the tax is, and when the tax returns were filed.
Domestic Support Obligations are debts which are in the nature of alimony, maintenance, or support. Most commonly this means child support. If you are past due on your child support or any Domestic Support Obligation then the past due support must be paid through the Chapter 13 bankruptcy plan payments. You must also stay current on any ongoing Domestic Support Obligation payments which come due after the filing of your Chapter 13. Domestic Support Obligations are never dischargeable. If you have any questions about your Taxes or Domestic Support Obligations then we will go over those at your free initial consultation with the Roach Bankruptcy Center.
Unsecured General Non-Priority Debts
In Chapter 13 bankruptcy you may not have to pay all of your unsecured general non-priority debts. These debts are debts that are not secured, such as a mortgage or car loan, or are not priority, such as taxes or child support. Unsecured general non-priority debts include credit card debts, medical bills, payday loans, bank loans, old repossessions, and most other debts listed on your credit report. Generally these debts only have to be paid if you have extra equity in assets or if you have excess income for which you can afford to pay the debts. In Chapter 13 you must pay all of your "projected disposable income" during the "applicable commitment period" of your plan. What this means is that you must pay any unsecured debts that you can afford to pay when your case is filed. To make this determination we will look at two income and expense guidelines. The first is the "Means Test" which will look at the last 6 months of income prior to the filing your Chapter 13 and compare that to the Median Family Income for a household of your size in the state in which you reside. If you are below the median you do not have any excess income. If you are above the median then we will need to fill out the entire "Means Test" form plugging in IRS deductions and some of your actual expenses to determine if you have excess income. The second is your monthly budget which we will project using your future income and expenses to determine what you can afford to pay. Additionally, if you have any changes to your income or expenses while you are in Chapter 13 then you may need to adjust the amount you are paying to the unsecured general non-priority debts. Any of the unsecured general non-priority debts which are not paid through the plan payments will be discharged at the end of the Chapter 13 with a few exceptions. The biggest exception is a student loan as student loans are generally not a dischargeable debt unless you can show an undue hardship. Student loans can be paid like the other unsecured debts or you could choose to pay the regular monthly payment in many circumstances. We can go over any particular questions you have about any of these debts which will have to be paid or can be discharged at a free Chapter 13 bankruptcy consultation with the Roach Bankruptcy Center.
Protection of Property
When you file Chapter 13 you will have to list all of the property you own on the date you file for bankruptcy. This property will include any real estate such as the residences, buildings, vacant lots, or timeshares. You must list any vehicles, boats, or motorcycles that you own as well. You will also need to list all of your household goods and furnishings which will include things such as furniture, appliances, linens, dishes, televisions, stereos, computers, cell phones, cameras, antiques, collectables, books, pictures, decorations, sports equipment, camping equipment, fishing equipment, tools, firearms, clothing, jewelry, and any other household item. There is no item that is too small or too low in value that you are exempt from listing it. You will also need to list any financial assets that you own such as money in a bank account, stocks, bonds, retirements, Pensions, 401(k)'s, interests in any businesses, corporations, partnerships, security deposits, annuities, education savings accounts, trusts, equitable or future interests, patents, copyrights, trademarks, trade secrets, licenses, franchises, tax refunds, child support or alimony owed to you, other money or accounts receivable owed to you, interests in insurance or insurance policies, inheritances, or any claims you may have against any party. If you have business assets or farm equipment and assets then you will also need to list those as well. This property is all protected in Chapter 13 because Chapter 13 is not a liquidation form of bankruptcy. How we protect the property is that we pay the value of any unexempt assets to unsecured creditors during the 5 year Chapter 13 Plan. In many case you will not have any unexempt assets and therefore, your assets will be protected without having to compensate unsecured creditors. At the free initial consultation with the Roach Bankruptcy Center will examine what if any unexempt equity you may have.
General 13 Rules
While there are many rules that apply to Chapter 13 bankruptcies, there are a few rules that you may want to take note right away. (1) Your Chapter 13 Plan will last approximately 5 years. It is possible for your plan to be shorter but that does not happen often. What that means is that the Roach Bankruptcy Center will be representing you for entire time you are in Chapter 13 and we will be there to guide you through any of the changes you may experience. (2) Your first Chapter 13 Plan Payment will be due 30 days from the date that you file your Chapter 13 case. You may be filing an emergency filing to stop a foreclosure or repossession and that date will always remain the same. However, many of your changes in life could result in you needing to make changes to your Chapter 13 Plan. (3) One of the many changes that could occur is that you would need to borrow money to purchase a house or vehicle or obtain any type of loan, for any reason, while in Chapter 13. Additionally, you may need to sell or purchase property while you are in Chapter 13. All of these are permissible so long as you first obtain permission from the Bankruptcy Court. The Roach Bankruptcy Center will help you with any of the changes that you need to make in your Chapter 13.