Detroit Chapter 13 Bankruptcy Attorney’s Guide
While Chapter 7 bankruptcies are the most common, there are situations when filing for relief under Chapter 13 bankruptcy is more appropriate. Chapter 13 bankruptcies are repayment plans. These plans are typically used to help catch up home or vehicle payments over a period of time, but not exclusively.
Chapter 13 bankruptcies may be filed by individuals or married couples only. Because the total household income is involved in determining the Chapter 13 bankruptcy plan of reorganization, it is very important to look at the total household debt to determine if only one party needs to file.
There are several reasons why a Chapter 13 bankruptcy plan of reorganization may be the better option when considering filing for bankruptcy. If you are behind on your house payment, and desperately want to keep your home, filing a Chapter 7 bankruptcy petition may only serve as a red flag to the mortgage company that there is no way you can afford to keep your home. In contrast, a Chapter 13 bankruptcy plan will address the delinquency to the mortgage creditor and explain how you propose to catch up those payments over the course of the Chapter 13 bankruptcy plan. Is your home under water as to your first mortgage, and you have a second mortgage or home equity line? Chapter 13 bankruptcy may be right for you. There is a procedure called an adversary proceeding which may be filed at the time you file for Chapter 13 bankruptcy. This will allow the lien on the second mortgage or home equity line to be stripped from the property providing the Chapter 13 bankruptcy plan is completed successfully.
In essence, the junior lien on the property gets treated like all the rest of the unsecured creditors (credit cards, medical bills and the like) and only receives a percentage of what they are owed. When all the terms of the plan are met, the Chapter 13 bankruptcy case is discharged, and the debtor is given a document to record with the Register of Deeds for the county the property is located in which states the lien has been lifted.
If you have previously filed for Chapter 7 bankruptcy protection under the bankruptcy code, you are not eligible for relief in an additional Chapter 7 bankruptcy filing for eight years. So, what do you do if you find yourself in a bind? A Chapter 13 bankruptcy plan of reorganization may be used in the interim to help give you some relief.
What happens when you make enough money to pay some of your debts, but what you can afford to pay monthly is vastly different from what the creditors want? This is another situation where Chapter 13 bankruptcy comes in handy. A Chapter 13 bankruptcy plan will take whatever income is left over after a reasonable budget and use these funds to pay the creditors over a period of time, anywhere between three to five years. The length of the Chapter 13 bankruptcy plan is generally determined by the current monthly income for the household as compared to the average family of the same size in the area. If the income is less than the average, a three-year plan is the standard. An income over the average will result in a mandatory five-year plan.
As always, there are exceptions to this rule. Your A Better Way Bankruptcy skilled attorney will help guide you into the best plan for your situation. So why file a Chapter 13 bankruptcy plan when you can afford to pay something to your creditors and you are current on the house or car? While debt negotiation or consolidation does help people, the creditors do not have to agree to a set of terms proposed. Often times a consolidator will collect payment from you over a few months before making a payment to the creditor. In the meantime, the creditor continues to let interest and late fees accumulate on the account.
When a Chapter 13 bankruptcy is filed, the creditor must calculate the balance owed on the date of filing. As a result, the creditor cannot tack on additional interest or late fees for the life of the Chapter 13 bankruptcy plan. As long as the automatic stay is in effect, the creditors are not allowed to sue on their debt, repossess property, foreclose on your home, or call you at all hours of the day or night. The filing of a petition with the bankruptcy court starts the proceedings. The Chapter 13 bankruptcy petition and schedules go into detail as to what the financial situation was prior to the filing of the Chapter 13 bankruptcy petition.
Many documents are needed to generate the information on these forms, such as pay stubs and other earning information, income tax returns, bank statements, car titles, real estate documentation and the like. A complete list of creditors must also be filed with the court. A creditor in bankruptcy is defined as everyone you owe money to. Anyone considering filing a Chapter 13 bankruptcy petition is cautioned to tell their bankruptcy attorney about any and all assets and creditors, even if there is a creditor they want “left out” of the petition. The bankruptcy court sends out notices of Chapter 13 bankruptcy filing to all creditors once the petition has been filed. A Chapter 13 bankruptcy plan of reorganization is drafted and filed in the initial filing. This Chapter 13 bankruptcy plan is served to every creditor you have, and all creditors have the opportunity to comment on the proposed plan. Most objections a creditor has to the plan are easily dealt with and a mutual agreement can resolve the matter.
Your attorney can answer any questions that arise regarding your plan. You will have an initial hearing roughly thirty to forty-five days from the day your case is filed. The tricky part here is that your first Chapter 13 Bankruptcy plan payment is due thirty days from the day your case is filed. Often times this payment becomes due prior to the hearing. It is very important that you know how to send your Chapter 13 bankruptcy payment in, and to what location. The trustee assigned to your case will not accept Chapter 13 bankruptcy plan payments in his or her office. Instead, each Trustee has a separate mailing address for all Chapter 13 bankruptcy plan payments, and requests that your Chapter 13 bankruptcy case number appear on anything that is mailed. It is also highly recommended that you retain a copy of any Chapter 13 bankruptcy payments made into your plan for your records. Chapter 13 bankruptcy plan payments are scheduled every pay period for the same amount.
For instance, if you are paid weekly, you will need to make one payment every week for the life of your case. If you are employed, this payment will come out of every paycheck received. If you are on a fixed income or are self-employed, this will be a once a month deduction from your bank account. You may be responsible for sending in Chapter 13 bankruptcy payments until these wage order deductions start working. It is a good practice to save proof of everything that has been mailed in your case. You just never know when you may need to reference those payments. Some people may also be required to send in their federal income tax returns to the Trustee’s payment address while their cases are pending. This occurs generally if your creditors are proposed to receive less than 100% of what they are owed through the life of the Chapter 13 bankruptcy plan. Your attorney will be able to tell you before your Chapter 13 bankruptcy case is filed if you will have this requirement.
These Chapter 13 bankruptcy repayment plans last anywhere between three and five years. At A Better Way Bankruptcy, we understand that life happens. It is hard to predict what the next three months will bring, let alone the next three years. We are with you every step of the way. As long as you keep us informed about the changes in your life, from births to retirement and beyond, we will be able to provide you legal guidance to put you on the path to a fresh start.
There is a better way.Call us for a FREE Consultation today to determine if Chapter 13 bankruptcy is right for you.
Erase Your Bills, Erase Your Worries, Erase Your Stress!