The Steps of a Chapter 13 Case
Under Chapter 13, you and your attorney propose a payment plan based on your ability to pay. Through this plan you usually pay back only part of your debts, and sometimes not much to many of your creditors.
Your plan lays out how much you will pay each month in a single payment to all or most of your creditors. That amount is usually much less than you were paying before. You pay that amount for a period usually covering three to five years. At the end of that time you would no longer owe any debts, except long-term ones like your home mortgage if you so choose and/or other possible ones like student loans. The rest of the unpaid debts are discharged, or legally written off, leaving you either completely or largely debt-free.
Your proposed plan is built around a detailed set of laws about how you must treat each kind of debt. If you have certain kinds of special debts called ?priority? debts?such as newer income taxes or any child support arrearage?those would have to be paid in full over the life of your plan. Secured debts?your mortgage(s), vehicle and furniture loans?are treated in a special way, whether these are paid in full or in part depending on many factors. And then debts that are neither ?priority? or secured?the so-called ?general unsecured? debts?are generally paid only to the extent you have money left over to pay them. Especially with ?priority? and secured debts, Chapter 13 usually gives you significant advantages over how these creditors are handled under Chapter 7.
Qualifying for Chapter 13
You must have a steady source of income to be eligible for Chapter 13, usually wages or self-employment income but can consist also of unemployment benefits, Social Security income, or even rental or other investment income. The more consistent and predictable the income is, the simpler your case will be to put together, get approved by the bankruptcy judge, and successfully completed.
Even a Simple Chapter 13 Is Very Powerful
Here are some of the potential benefits of Chapter 13, none of which are available under Chapter 7:
- Cure your mortgage arrearage, have up to 5 years to do so, while your home is protected from foreclosure.
- If your home is worth less than your first mortgage balance, ?strip? off a second mortgage from your home?s title and avoid making those second mortgage monthly payments.
- If your vehicle loan is more than two and a half years old and the vehicle is worth less than the debt you own, do a ?cramdown? on that loan, which reduces both your monthly payment and the total amount you pay before you own it free and clear.
- Pay that portion of back income taxes that can?t be discharged, while being protected from tax collection by the IRS.
- Catch up on your child and/or spousal support arrearages while being protected from the extreme collection powers of support enforcement agencies.
Contact the law Office of Andrew B. Finberg
If you are in New Jersey, we can help you decide whether Chapter 7 or 13 is the best choice for you. To learn which would be better, come in to see us for a free, no-obligation consultation. Please call (856) 988-9055 or use this form to contact your New Jersey bankruptcy attorneys at the Law Office of Andrew B. Finberg, LLC. We look forward to the opportunity to bring you peace of mind.