Chapter 13 Bankruptcy - See Alternatives
According to the current statistical records, Chapter 13 bankruptcy is filed by 25% of the total debtors filing for bankruptcy. This article provides a perspective view of this particular chapter of the Bankruptcy Code.
Definition: According to the Bankruptcy Code, Chapter 13 Bankruptcy is meant for individuals wanting to pay off their debts within a period of three to five years. Better known as reorganization bankruptcy, Chapter 13 helps individuals or small scale business owners to retain non-exempt properties and pay back the Creditors under a repayment plan. This type of Bankruptcy provides with an alternative to the liquidation process of Chapter 7 Bankruptcy.
Subchapters: Chapter 13 bankruptcy is subdivided into 2 sub chapters:
- Subchapter 1: Highlights primarily on the formation of trustees and duties of trustees, rights and powers of debtors, filing and allowance of post petition claims, description of property of the estate and instances where a debtor can convert a case under this chapter into a case under Chapter7.
- Subchapter 2: Primarily highlights on the filing of plan along with prescribed contents by the debtor, modification of plan before confirmation, confirmation of plan by the court, commencement of rescheduled payment plan by the debtors (within 30 days after the plan is filed), effect of confirmation plan on creditor, circumstances when the Court shall discharge a debtor from his debt, modification of plan at any time after confirmation but before the completion of payments under such plan, revocation of an order of confirmation on request of a party in interest at any time within 180 days after the date of the entry of an order of confirmation.
Who can qualify for Chapter 13: Chapter 13 can be filed by,
- Individuals having regular income.
- Individuals not having more than $250,000 in debt and more than $750,000 in secured debt.
- The debt amounts must be specific and fixed and not followed by any conditions.
Who can't qualify for Chapter 13: Chapter 13 can't be filed,
- In the name of a business.
- In case of sole proprietorship.
- By stock brokers and commodity brokers.
Chapter 13 is an ideal option for:
- Anyone who is lagging behind on mortgage and need fast action.
- Anyone wanting to protect assets from liquidation under a chapter 7.
- Anyone who can't qualify for Chapter 7 due to high disposable income.
- Farmers not qualifying for chapter 12 with debt not related to farming.
Funds that can be used for repayment under Chapter 13: You can use the following incomes to fund a Chapter 13 plan,
- Fixed salary
- Income on compensatory grounds
- Income from business
- Income from part time jobs
- Pension payments
- Earning due to social security benefits
- Child support or Alimony
- Earnings from royalties and rents
Advantages of Chapter 13:These are the advantages of Chapter 13:
- Allows keeping both exempt and non-exempt properties.
- Debts not discharged by Chapter 7 can be reduced.
- Chapter 13 ,better know as Wage earner's plan,as it stops wage garnishment.
- Any co-signer is immune from the creditor's efforts so long as the Chapter 13 plan provides for full payment.
- Foreclosure of agreement for home purchase can be delayed.
- Chapter 13 can be filed immediately after Chapter 7 discharge to pay off any remaining liens.
- Provides with the provision of modifying interest rates on some loans.
- Payment term on most debts can be extended under Chapter 13.
- Affordable payments on secured and tax creditors can be achieved under Chapter 13.
- Chapter 13 can be filed repeatedly.
Disadvantages of Chapter 13: These are the disadvantages of Chapter 13,
- Chapter 13 bankruptcy filing will appear in the Credit reports for 7 years.
- Borrowing a large sum of money will be difficult as Creditors may question your credibility.
- The repayment period after Chapter 13 filing, hampers the usual living standards of the debtors as they are put to rigid budget.
- Not all debts are discharged under Chapter 13 and some debts will survive after your bankruptcy is closed and you must continue paying.
- At par with the intricacies of Chapter 13 filing, legal fees are higher.
- The amount of debt you can discharge under Chapter 13 is limited.
- Stock brokers and commodity brokers are not allowed to file a petition under Chapter 13 bankruptcy.
- A bankrupt under Chapter 13 can get credits only at higher interest rates.
- Extra costs like trustee's charge, attorney and court fees are involved in Chapter 13 filing procedure.
Success and popularity of Chapter 13 bankruptcy in particular cases prove that Creditors need the money back more than assets from their debtors. However, one should assess the feasibility of repayment plan under debt consolidation programs before filing for Chapter 13. Both Debt consolidation program and chapter 13 bankruptcy provides with repayment plans followed by varied degrees of risk factors. Only you need to make the right choice.
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#1
12-13-2008, 07:01 AM
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Chapter 13 Bankruptcy - See Alternatives
I am in the process of filing Ch 13. I will be confirmed on Jan.4. The problem that I'm having is that I cannot afford the Ch 13 payments. I pay $1200 a month for this and it's supposed to be for 5 years. I have told my lawyer and she says that she thinks we can make it a ch 7 but that I should keep it a 13 until I have enough that the trustee can pay the 2 months I'm behind on my house. That way when it converts to a 7 the mortgage will be caught up and I won't have to worry about the mortgage company filing for forclosure. The problem is that I have stopped paying my 2 car notes as well due to them being in the ch 13 plan and if it turns to a 7 then I will be 3 months behind on the cars due to this. Is there anything that I can do to make it a chapter 7 now and not have to wait a few months where I won't lose my house or my or my wifes cars? I'm in a really desparate situation. I thought bankruptcy would alleviate my stress but it actually has added to it! I don't know what to do or where to turn. Please if anyone has any ideas, please let me know. I can't sell my house because I have 2 mortgages on it and they are for more than it's worth and neither of the mortgage companies are in the Hope for Homeowners act that was recently passed. Please someone give me some advice!
Thanks 
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#2
12-26-2008, 09:49 AM
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#3
01-05-2009, 01:02 PM
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I recently have spoke to a bankruptcy lawyer and what I found out is if your house doesn't have significant equity in it, you can file for Chapter 7. Banks will not come after your house if you are current on your payment and there is not siginificant equity. Hope this helps!
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#4
04-02-2009, 04:50 AM
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filing chapter 13
Me and my wife filing bankruptcy and our repay 649.00 to the trustee,but our every month bill add up to 3,400 dollars plus the 649.00.we didn't add the first mortgage to chapther 13 which is 975.00 or the car which is 450.00 what can we do.
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#6
04-02-2009, 07:32 PM
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bankruptcy ch 13
we are filing ch 13 and we have 2 mortgages on our house. the 1st mort payment is 975.16 & the 2nd is 437.26. we are current on the 1st mort b/c we recently completed their idea of a loan modification. we had to pay almost $3000 in arrears and they reduce our interest rate from 7.25 to 6.25 but the payment increased by almost $100 a month. we had an appraisal done on the house and the value is around 156,000. the balance on the 1st mort is 155,000 and the balance on the 2nd is 35,000. since the appraised value of the house is more than the 1st mort, it looks like we have equity but we don't. we did not include our house in the bankrupcty b/c we desparately want to keep our home. our total expenses are about 4362 a month and our income is about 5000 a month. even though we have some left over at the end of the month we have to save that for our property taxes and income taxes. we would like for the bankrupcty judge to somehow reduce our mort payment. we thought that the mort companies had to try to assist with making paymnets lower but we have not had that to happen for us. our experience seems to be normal from what we are hearing from friends & family. what questions can we ask the judge if we get a chance to speak during the hearing? what do you suggest? any advise is greatly appreciated.
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#7
04-03-2009, 06:53 AM
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Senior Member
Join Date: Mar 2008
Posts: 746
Credits: 5,887
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I'm not honestly sure. Did you use a lawyer for your Chapter 13? If yes, I would chat with him/her about this, they should be able to to assist. I think I've read some where that the president is wanting to put something in place that would allow BK Judges to reduce or changes mortgages. Hang in there, someone with more knowledge about BK and Mortgages will be by to help.
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#8
04-05-2009, 10:22 AM
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"I recently have spoke to a bankruptcy lawyer and what I found out is if your house doesn't have significant equity in it, you can file for Chapter 7. Banks will not come after your house if you are current on your payment and there is not siginificant equity. Hope this helps! "
Florida thanks for the helpful tip.
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#9
04-16-2009, 10:47 AM
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File a motion to lower your payments. I am going through the same thing. My motion will be heard May 1st and if the Judge denies my motion, my plan will be dismissed. I still do not understand how filing BK helps main street. Wall Street is being giving a break, what about us?
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#10
11-22-2009, 09:09 PM
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We are currently behind on our mortgage and have tried to work with indymac to refinance but they ave denied our request. We are now applying through the nonprofit organization, naca, hoping for a better outcome. We have looked into filing a chp 7 but have been told we dont quaily because we dont pass the means test based on our gross monthly income. So we were told to appply for chp 13 but the payments are SO high, we really dont think we can afford that for 5 years. Is there any other alternatives???
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#11
11-23-2009, 12:37 AM
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