Chapter 13

What is Chapter 13 bankruptcy?

Chapter 13 is a type of bankruptcy proceeding available to inpiduals and sole proprietorship businesses to reorganize and eliminate debts. The process includes the filing of a plan which pays all or a percentage of your debts, usually over a three to five year period, based on what you can afford, not what your creditors believe you can pay. Chapter 13 can release you from certain debts that cannot be eliminated in a Chapter 7 bankruptcy.

Will Chapter 13 stop my wage garnishment?

Yes. A bankruptcy filing creates an “automatic stay” which tells your creditors they can no longer garnish wages or bank accounts, or collect from you or your property in any manner without further order of the Court.

Should I take money out of my retirement to pay my creditors?

No! Retirement funds are just for that, your retirement. Most retirement accounts are protected from garnishment in and outside of bankruptcy. Please talk with our attorneys before withdrawing any retirement funds to pay creditors.

I owe more on my house than it is worth. Is there any way to get rid of the second mortgage on my home and keep my house?

Yes. Bankruptcy laws allow debtors to “strip away” unsecured second mortgage loans, as long as there is no equity in the property for the loan to attach to. This is only available in Chapter 13 bankruptcy.

I need my car but I am delinquent and have a high interest rate. Can I restructure the loan in bankruptcy?

In Chapter 13 bankruptcy, underwater (negative equity) auto loans that are older than 910 days are eligible for restructuring. If your auto loan is recent, interest rates may be reduced if they are too high compared to the current market interest rate.

Can I stop a foreclosure and keep my house?

Bankruptcy can be utilized to stop foreclosure by filing a case prior to the foreclosure sale. A Chapter 13 plan allows three to five years to catch-up the back payments while you maintain the regular ongoing payment. Even if you cannot afford the regular payments, if you have equity in the property, your Chapter 13 plan can give you time to sell the property and recover your equity.

I am cash poor, but have equity in my house and car. Will I lose my property if I file bankruptcy?

No. Chapter 13 bankruptcy allows you to retain equity in property and pay your creditors the liquidated value of your property over a three to five year period of time. Liquidated value is calculated based upon the market value of your property, less any loans, less any exemptions. Chapter 13 is designed to help you keep your property, while paying a monthly payment to your creditors.

Is there a benefit to paying tax debt through Chapter 13?

Yes. Chapter 13 allows penalties to be treated like credit card debt. A repayment plan can be established which allows you to make payments over time on the past due tax and interest on that tax. Once the plan is completed, penalties are removed from your tax account.