Also known as the “wage earner plan,” a Chapter 13 is where you make a monthly payment to the Trustee for a period of 36 – 60 months. The Trustee takes your payment and sends out checks to your creditors. How much your payment is and how all of your creditors are treated depends on how the types of debts you have and your income and living expenses.
Usually, people file a Chapter 13 for very specific reasons: behind on a mortgage, behind on auto payments, owe recent taxes, or protect assets that would be lost in a Chapter 7. If we determine at your consultation that a Chapter 13 is best for you, we will tell you what you can expect as a monthly payment and how each of your debts will be treated in the “plan”. Filing Chapter 13 bankruptcy is complicated; you need an experienced and knowledgeable bankruptcy attorney to guide you through the entire legal process.
Chapter 13 may allow you to do a Lien Strip. Lien stripping refers to the process of eliminating your junior liens (such as second or third mortgages or HELOCs) from your real estate. Lien stripping allows you to get rid of the “wholly unsecured” liens on your property and you can still keep the property.
In many cases, if you owe more on your first mortgage than your house is worth then your second mortgage can be stripped.
Example. Say you own a house worth $150,000 and you have a $200,000 first mortgage and $85,000.00 on a second mortgage. In this situation, you can strip the second mortgage from your house through a Chapter 13 bankruptcy.
How Do I File a Chapter 13 Bankruptcy?
Preparing a Chapter 13 is a huge amount of work and there are a lot of documents that we need from you. Of course, we do prepare all of the documents that are submitted to the court but we can’t do it without your help. A Chapter 13 consists of schedules that list assets, debts, income, expenses, a statement about your recent financial history, the Chapter 13 plan and the Means Test. The Means Test was designed to determine whether or not you qualify to file a case under chapter 7 of the Bankruptcy Code, and if not, how much you need to pay your unsecured creditors in a Chapter 13 case.
Everyone who files a bankruptcy is required to do Credit Counseling. This sounds much more daunting than it really is. You can do it online and it usually takes less than an hour.
We have many years of experience to make the process as easy and painless as possible for you.
What Happens After the Chapter 13 is Filed?
As soon as your Chapter 13 is filed the Automatic Stay goes into effect which stops all collection activities against you. Creditors are forbidden to call you, send you collection letters, file a lawsuit against you, foreclose on your home, repossess your auto, they must stop any garnishments. They can’t contact you in any way regarding payment of the debts.
Your first plan payment is due the month after your case is filed.
About six weeks after your case is filed you will be required to attend the Meeting of Creditors. Of course, we attend this hearing with you. At the Creditors Meeting, you meet the Trustee and he asks you a series of questions. As long as you have been honest in the petition that is originally filed and the paperwork is done correctly your hearing should go smoothly.
After the case is filed you are required to do a Financial Education course. This can be done online and generally takes 2 to 2.5 hours.
At the Law Offices of John C. Kyle and Gregory J. Smith we have over 65 years of combined experience in all facets of both Chapter 13 and Chapter 7 bankruptcy. We will be your advocate throughout the entire Chapter 13 bankruptcy proceedings.