Filing Chapter 13 bankruptcy can be a complicated process. Chapter 13 allows you to reorganize your debts while at the same time retaining your assets. The payment process involves monthly payments that are made to the court over the course of a three to five year time period. This allows your creditors to receive the money that you owe them in increments over that time period. It is important that you be able to afford your monthly payment. This is because if you miss even one payment, a court could dismiss your case. If you are contemplating or in the process of filing for a Chapter 13 bankruptcy, speak to an experienced Greeley bankruptcy attorney to discuss your case and explore your options.
Proposing a Payment Plan
Chapter 13 bankruptcy requires you to submit a proposed payment plan that is acceptable to you, the court, and your creditors. The plan lasts for a period of three to five years. Either the court or your creditors – or both – can reject your proposed plan. The amount of the monthly payments will be based upon the following factors:
- Your monthly income
- The amount of secured debts that you will continue to pay off
- The amount of non-exempt assets that you must buy back over the next three to five years
- The total amount of money owed to your creditors
- The total amount that your creditors may have been able to collect in a Chapter 7 bankruptcy proceeding
An experienced Greeley bankruptcy attorney will be able to assist you with crafting a workable proposed payment plan in your case.
Secured vs. Unsecured Debt
Secured debts are those in which the asset itself serves as the collateral. Primary examples of secured debts include homes and motor vehicles. For example, if you fail to make the mortgage payments on your home, the bank can foreclose on the home. Unsecured debts include credit card debts and unpaid medical bills.
It is important to note that in a Chapter 13 bankruptcy proceeding, you may not have more than $1,484,200 of secured debt and $394,725 in unsecured debt.
Advantages of Declaring Chapter 13 Bankruptcy
Chapter 13 bankruptcy, as opposed to a Chapter 7 bankruptcy, has many legal advantages. Some of the most important legal advantages of filing for a Chapter 13 bankruptcy include the following:
- You are allowed to keep your home and are given time to catch up on any arrears owed to your mortgage company.
- Mortgage modification mediation programs are made available to you.
- Interest on certain debts is tolled while your bankruptcy case is pending (e.g., student loans and back taxes).
- You can pay off your debt(s) via a payment plan that is approved by your creditors and the court.
- You can reduce or eliminate unsecured, “lower priority” liens, such as second mortgages and home equity lines of credit (HELOC’s) from your home under certain circumstances.
- The timeline is stretched out over a period of three to five years, allowing you plenty of time to pay off your debts and get caught up on payments.
- You are permitted to keep all of your property and assets.
- The principal loan balance may be reduced down to the actual market value of the property or assets securing the loan (i.e. when more is owed than what the asset is actually worth).
An experienced Greeley bankruptcy attorney will be able to explain these advantages to you in more detail. He can help you to decide whether a Chapter 13 bankruptcy is right for you.
Contact a Greeley Bankruptcy Attorney Today to Discuss Your Case
It is important that you be aware of all of your legal options in order to make an informed decision about what bankruptcy chapter to file. Speak to a Greeley bankruptcy attorney by calling Holland Law Office at 308-241-0474.