Under Chapter 13 of the Bankruptcy Law, individuals who cannot discharge their debts or want to keep their homes but have fallen behind in their mortgage payments or car payments can consolidate their overdue payments and repay their pre-filing arrears in monthly payments for a period of up to 5 years (60 months).
The amount of the monthly payment and the time period varies for each individual based upon a number of factors including:
•The monthly income of the individual
•An individual’s monthly expenses
•The amount of the debt and whether the debt is in the nature of a secured debt (i.e. home mortgage, auto loan) or unsecured debt (i.e. credit cards, personal loans, bank loans which are not guaranteed by a government agency)
Non-dischargeable priority debts, which include child support arrears, alimony or maintenance arrears, taxes owed government authorities, criminal fines, restitution, all debts which were reduced to a judgment prior to the bankruptcy filing, secured and priority debts, under Chapter 13 must be repaid 100% on the dollar.
Unsecured debts may be repaid at a minimum of 10% up to 100% based upon an individual’s available monthly income.
How the Chapter 13 Process Works:
After our initial consultation and a review of your financial situation, we will advise you as to whether you qualify for a Chapter 13 bankruptcy.
If we mutually agree that Chapter 13 is your best alternative, we will prepare a plan which will provide a monthly payment covering a period from 36 months to a maximum of 60 months. This one monthly payment will be paid to the Bankruptcy Court and at the conclusion of the time period, assuming all plan payments have been made, you will receive a discharge.
The payments will be made to a Bankruptcy Trustee who is authorized by the Court to receive your payments and distribute the plan payment to the creditors.
Common Advantages of Chapter 13:
•You can keep your property while spreading out time to pay past due accounts.
•You will have up to 5 years to catch up on delinquent accounts.
LIEN STRIPPING:
Millions of American homeowners are now upside-down on their home mortgage and they are looking for a way out. For many homeowners, between their first and second mortgages, they owe more money on their home than what it is currently worth. Homeowners have seen values drop 30-50% and many are making a “business” decision to walk away without ever exploring ways to save their home.
Wouldn’t it be much easier to save your home if you only had a first mortgage and no other payments? What if you could effectively wipe out $10,000, $50,000 or $100,000 of what you owe on your mortgage?
If your home value has suffered a decrease in value, and you have a second mortgage or home equity loan, we can explore removing that lien by filing a Chapter 13 reorganization. How it works is, if your home is only worth what you owe on your first mortgage, the second mortgage is no longer considered to be a "secured" obligation and can be removed in the Chapter 13 program. Our firm will basically convert the second mortgage, home equity loan or other lien to an unsecured debt. You will only have to pay back what you can afford to pay back.
If you cannot afford to pay any back then the debt will just be discharged. This process is called "Lien Stripping" and has many benefits:
- This will lower payments going toward your monthly mortgage obligation.
- Any money paid toward the stripped lien would be paid at 0% interest and most times paid at pennies on the dollar.
- At the successful completion of the chapter 13, documents are filed with the register of deeds to legally remove the secondary loans or liens from your property and any unpaid balances are eliminated or discharged.
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