Chapter 13

Any individual or married couple, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as the individual or couples’ total debts are less than $2,750,000. This amount is a recent change in law that was enacted in 2022. A corporation or LLC may not be a Chapter 13 debtor. Chapter 13 also has very different rules from Chapter 7 in terms of filing after a previous bankruptcy filing. For example, even if you filed for Chapter 7 or Chapter 13 recently, you still may be eligible for filing under Chapter 13 once again. While the rules are somewhat complicated, at Sader Law Firm we are happy to guide you and provide all the options available to help you obtain your financial goals.

The law makes Chapter 13 bankruptcy very available for people to access. It is also often favored by creditors since it allows a full or at least partial repayment of debts.

While Chapter 13 has far less restrictions than Chapter 7, an individual cannot file under Chapter 13 or any other chapter if, during the preceding 180 days:

• A prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court.
• The petition was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.

In addition, debtors under Chapter 13 must receive credit counseling from an approved credit counseling agency within 180 days before filing and must also take a Financial Management Course after filing the case is filed but before the Discharge Order is entered. At Sader Law Firm, we will arrange for you to complete all necessary courses so that you can complete them at home over your phone or computer. At SLF we work with you to make the entire debtor education and filing process as easy as possible.

A Chapter 13 case begins as outlined above in our Chapter 7 page by the potential client emailing or calling our office to speak with an attorney. Thereafter, once all the required information is obtained, the case starts by the filing of a petition with the bankruptcy court. Unless the court orders otherwise, the debtor must also generally file the same documents required in a Chapter 7 bankruptcy. As discussed below, the debtor must also file a Chapter 13 plan.

Chapter 13 offers individuals a number of advantages over Chapter 7 bankruptcy. Perhaps most significantly, this chapter offers individuals an opportunity to save their homes from foreclosure (as well as their cars from repossession). By filing under Chapter 13, individuals can stop foreclosure proceedings and then have the opportunity to cure delinquent mortgage payments over time. SLF can even arrange for emergency filings with only some of the required information to stop an imminent foreclosure. Chapter 13 bankruptcy compels the mortgage creditor to accept reasonable payments on the past due amount based on what the debtor can afford.  Nevertheless, individuals must make  mortgage payments that come due after the filing of the Chapter 13 case .

Additionally, individuals can reschedule secured debts (other than a first mortgage for their primary residence). They can then extend such secured debts over the life of the Chapter 13 plan. Doing this can lower payment amounts and interest rates. This is often referred to as a “Cramdown.” Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Chapter 13 plans also can reschedule past due taxes in amounts that a debtor can afford.

Finally, Chapter 13 acts like a consolidation loan. Under it, the individual makes the plan payments to a Chapter 13 trustee, who then distributes payments to creditors. Individuals will have no direct contact with creditors while under Chapter 13 protection.

In addition, a debtor may be able to strip (or remove) a second mortgage if the balance due on the first mortgage is equal to or greater than the home’s value. If the court grants this request, then the debtor may not have to pay the second mortgage if the debtor completes Chapter 13.

The automatic stay stops the foreclosure proceeding as soon as the individual files the Chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time and based on what is affordable. The debtor may lose the home if he/she fails to make regular mortgage payments due after the Chapter 13 filing.

If you would like to know what it feels like to be rid of your credit card bills, medical bills, signature loans and foreclosure threats, then we can help. Please contact our firm at 816.561.1818 for a free consultation and ask to speak with one of our attorneys.