CHAPTER 13 BANKRUPTCY RELIEF
Chapter 13 bankruptcy doesn’t provide the quick discharge of a Chapter 7. However, it does provide some benefits not available in Chapter 7. In addition, some people don’t qualify for a Chapter 7 and must file a Chapter 13 because their income is too high.
With a chapter 13 bankruptcy, you create a payment plan based on your income, your withholdings and deductions, your living expenses, and your ability to pay. Your plan will last 3 to 5 years, and after your plan ends, most or all of the remaining unsecured debt is discharged.
BENEFITS OF A CHAPTER 13 BANKRUPTCY
- Provides the potential to eliminate a second or third mortgage after discharge.
- Stops foreclosure and allows you to catch up on mortgage arrears.
- Includes a lower up-front payment of attorneys’ fees.
- Provides the potential of reducing the outstanding balance of your car loan to the value of the car.
- Provides the potential of reducing the interest rate on your car loan.
- Immediately stops creditor harassment.
- Allows you to keep more assets than in a Chapter 7 if you make payments into the plan,
- Discharges some debts, such as debt to an ex-spouse.
- Discharges older income tax debt. Non-dischargeable income tax debt, past-due child support and maintenance, and other non-dischargeable debt are paid as a priority over general unsecured debt.
- Immediately stops wage garnishments and bank levies.
- Immediately stops lawsuits of creditors.
EXAMPLE DEBTS DISCHARGED IN A CHAPTER 13 BANKRUPTCY
- Credit cards
- Department store cards
- Gas cards
- Medical bills
- Payday loans
- Personal loans
- Old income tax debt*
- Delinquent utility bills
- Car loans
- Deficiencies after repossession or foreclosure
- Second mortgages**
*Chapter 13 bankruptcy discharges income tax debt if the tax return was last due at least three years before filing, and the return was filed at least two years before filing. More recent debt is paid ahead of unsecured creditors, and usually satisfied in full by completion of the plan. Consult with an experienced bankruptcy attorney at Goldbach Law Group to determine if your specific tax debt is dischargeable.
**Chapter 13 bankruptcy allows you to treat a second mortgage as an unsecured loan and void the mortgage lien if your house is worth less than the balance of the more senior liens like the first mortgage.