Reorganization Using Bankruptcy
Chapter 13 bankruptcy provides people a way to reorganize, or adjust their debts. This can be extremely useful when one seeks to regain his or her financial fitness. Let’s look at how debts are treated within Chapter 13 plans.
A percentage is paid upon the unsecured debts (think credit cards, medical debt, loans without collateral attached) in a Chapter 13 case, and the interest on these unsecured amounts freezes at the point of filing. This is of great benefit to the filer, and lets them assert more control in resolving these debts.
Other debt involved in most of my clients’ Chapter 13 plans fall into three main categories: 1) vehicle, 2) residence, and 3) tax debt.
Car contracts with unfavorable interest rates can be altered within the Chapter 13 plan. The interest rate that has been negotiated locally in this jurisdiction is prime plus 2%. This means your interest paid on any vehicle within your plan can be far lower than the initial contract rate.
Further, if a vehicle was purchased over thirty (30) months prior to the filing, and there is negative equity, this portion of what is owed can be stripped off and placed into the unsecured debt portion of your reorganization plan. Last, if you are behind on car payments when you file your Chapter 13 case, your case ends any threat of repossession, and puts an end to any more accumulation of late fees.
If you own your own home, Chapter 13 can enable you to strip off any judgment liens imposed by your creditors, as well as to strip off second or third mortgages that are not backed by any equity in the collateral.
If you have fallen behind on mortgage payments, the filing of a Chapter 13 plan ends any fee and penalty accumulation and halts the mortgage lender’s ability to foreclose. You will have a period of sixty (60) months to catch up any arrears. This means even if you have fallen behind on your mortgage by $12,000, the catch-up payments to the lender would be $200 monthly.
The discussion on taxes owed and the treatment for them in your chapter 13 plan is complex, and should be conducted during your initial consultation with my office. Suffice it to say that these debts can be handled within your plan, and under certain conditions, your overall balance can be eligible to be lowered.
So, why hire my office to represent you in your Chapter 13 proceeding? I have the knowledge and pedigree to assert the best arguments relative to your individual situation, securing the lowest percentage possible to your unsecured creditors, and negotiating your best outcome. I know how to package your case and budget effectively fight for you. Your financial freedom is just a phone call away.