Chapter 13 Bankruptcy
Is Chapter 13 Bankruptcy Right for Me?
Nashville Bankruptcy Attorneys are here to guide you.
Chapter 13 is one method under the Bankruptcy Code to obtain relief from your creditors while at the same time providing a fair means to pay them back as much as you can. It allows you to keep some of all of your property during the time you are paying your creditors back, and it permits you to modify some contract payments and interest rates. Your plan can eliminate late charges and penalties and allow you to extend payments on some of your debts. Chapter 13 has gained widespread acceptance across the country as an attractive alternative to straight bankruptcy (Chapter 7). Chapter 13 bankruptcy allows you to pay your debts at an affordable rate rather than the rate creditors want you to pay. Chapter 13 bankruptcy normally allows you to keep your personal property, such as homes, cars, and furniture. Even if you are behind on your car or home payments, you can keep them over the objections of creditors. This is different from a Chapter 7 where the creditor can take back the car, home, or furniture if they want to, even if you are paying for it on time. Chapter 13 also allows you to pay some or all of your unsecured debts, such as medical bills, credit cards, and payday loans.The creditors cannot call you at home or work. They cannot send you letters, sue you, garnish your wages, or seize your property. They have to direct all contact with you through your attorney’s office. Even if you are already being garnished or a judgment has been entered against you, it is important to know:
Chapter 13 stops garnishments
Chapter 13 stops foreclosures and repossessions
The IRS can be paid through a Chapter 13
It is possible to substantially lower payments on cars or furniture
( Your attorney will let you know during a consultation if your car or furniture loans qualify to be lowered. )
Will Chapter 13 Lower My Mortgage Payment?
No. On homes, the regular mortgage payment stays the same. You can catch up the back payments on your house over a two year period. For example, if your mortgage payment was $500.00 per month and you were three (3) months behind ($1,500.00), you would still pay the regular mortgage payment of $500.00 per month and add on about $65.00 extra each month to catch up the back payments.
How Does a Chapter 13 Bankruptcy Work?
Chapter 13 puts all your bills into one bill like a consolidation loan. This is withheld from your paycheck (like your federal taxes) and is then sent to the Chapter 13 Trustee’s office by your employer. Once per month, the Trustee collects the money and sends it to your creditors.
Normally secured debts like your home, car, and furniture bills get paid first by the Trustee, as well as other priority debts like taxes and child support. Then after these secured debts and priority debts, money is sent to your unsecured creditors. You have up to five (5) years to pay a Chapter 13. While the unsecured creditors are waiting to be paid, they cannot charge you late charges, penalties, or interest. Sometimes unsecured creditors only get a very small percentage of what they are owed, but if you complete your Chapter 13 plan, the balance of what you did not pay is discharged, or wiped out. If you have a co-signer on any of your loans, read our blog about co-signing student loans to find out what happens with co-signed loans in a Chapter 13 bankruptcy.
If you are employed, you must pay your bankruptcy through a payroll deduction from your paycheck. This is not a garnishment, and you cannot be fired or discriminated against by your employer for filing Chapter 13. Most employers are familiar with Chapter 13 and realize it is a federal law. While it is a little more work for payroll, it stops the employees from being hassled by debt collectors. Do not be worried about a payroll deduction. You probably have fellow employees in Chapter 13.
You do not need to have a regular job to file Chapter 13. You can be self-employed or have income from Social Security, disability, retirement, or other government assistance. The only requirement is that you have a regular source of income.
Chapter 13 has provided peace of mind and a legal method of dealing with debt problems for millions of people. It can do the same for you.
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It’s a good idea to ask questions regarding your options and rights before deciding to file for bankruptcy. At Flexer Law, you can meet with an experienced bankruptcy attorney in Nashville, Murfreesboro, or Columbia to get all of your questions answered before you file. The initial consultation is free and can help you determine if filing a Chapter 7 bankruptcy is the right decision for you.