If you are trying to save your house or your car, or some other asset, a Chapter 13 Bankruptcy case or repayment plan for your debts may be appropriate.
In a Chapter 13 Bankruptcy case, a repayment plan is submitted to the Court in order to consolidate debts. The repayment plan lasts for between three to five years and contains a monthly payment.
During the Chapter 13 case, the automatic stay prevents creditors from collecting on any debt incurred before the bankruptcy filing, and the creditors must adhere to the terms of the repayment plan.
To qualify for a Chapter 13 case, you must be working or have some source of income and be able to make payments on the plan. The Court must approve a budget, which shows that you have the ability to pay both your living expenses and your monthly payment.
The type of debts in a Chapter 13 case are mortgage arrears, balances on vehicle loans or other assets secured by a loan, student loans, taxes (if outstanding), and any other unsecured debt, including credit cards and medical bills.
- Stop Foreclosure
- Keep Your Car
- Consolidate Student Loans
- Cosigned Debt
- Chapter 13 vs. Refinancing
- Stop Foreclosure Immediately
If a foreclosure case has been filed against you or your home, a Chapter 13 case stops the foreclosure before the sale date. The repayment plan allows you to repay all your outstanding mortgage arrears.
However, after filing your case, you must make your monthly mortgage payments to prevent the mortgage company from seeking to resume the foreclosure case based on these future payments.
Keep Your Car
A Chapter 13 case also stops your finance company from seeking to repossess your car. The entire balance owed on any vehicle debt may be consolidated with your other debt in a Chapter 13 repayment plan. The plan may also be able to reduce the interest rate that is paid to the finance company. You make only one payment on your car, and that payment is the monthly payment under your repayment plan.
Consolidate Student Loan
Generally, student loans cannot be discharged or eliminated in a bankruptcy case. However, if you file for Chapter 13, your student debt can be consolidated with your other debt. You will be protected from any collection activity by the student loan company during the term of the repayment plan.
Cosigned Debt
Chapter 13 protects any individuals that co-signed a debt with you. Therefore, if a friend or family member co-signed on a mortgage, car loan, or other debt, the creditor cannot collect against the cosigner during your repayment plan.
Chapter 13 vs. Refinancing
Many individuals cannot file a Chapter 7 case because of the equity in their home. These same individuals may look to repaying their debt through refinancing either by taking out a larger home mortgage or a second mortgage.
Rather than losing the equity in your home or taking out another mortgage that you may not be able to afford, a Chapter 13 repayment plan allows you to pay off your debts for up to five (5) years with little or no interest and, most importantly, allows you to keep the equity in your home.
You should look into a Chapter 13 repayment plan before deciding to take out a high interest loan that may include several broker, title, and closing fees. Please call us and take advantage of our free consultation.
