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Bankruptcy Attorneys

Chapter 13

Chapter 13 of §11 of the United States Code, the “Bankruptcy Code,” is commonly referred to as a “wage earners plan.” A bankruptcy of this sort allows you to discharge unsecured debts through a specialized three or five year payment plan, while keeping all of your assets. The plan’s duration is three years or less if yours and your spouse’s combined yearly income is less than the median income for Florida; five years if your income is equal to or more than the state’s median income. To be eligible for a chapter 13, among other things, your unsecured debts must be less than $360,475, and your secured debts cannot exceed $1,081,400. Also, you will need to have enough income during the three or five years of your “plan” to pay for your necessities and to keep up with the required payments as they come due.

Along with filing mostly the same documents required in a typical chapter 7, a bankruptcy attorney in this type of bankruptcy must also submit a debt repayment plan. The “plan” must: 1) commit all earnings to the trustee as is necessary to effectuate the plan, 2) commit all disposable income to the plan, 3) provide full payments for all claims entitled to “priority” under §507, 4) provide the same treatment for all claims within a particular class of claims, if the plan classifies claims and 5) provide for unsecured creditors to receive at least as much as they would have under chapter 7’s “best interest of the creditors” test.

The most important thing about a chapter 13 case is that it will allow you to keep valuable property, especially your home and car, which might otherwise be lost, so long as you can make the payments under the “plan.” In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payments in order to be current on the amount you have fallen behind.

Another extremely powerful part of a chapter 13 bankruptcy is the court’s ability to modify the rights of holders of unsecured claims and even secured claims, other than those in which the security is your primary residence. Under this provision, a bankruptcy court can “cram down” new interest rates, loan payments, or even change the outstanding balance. There is also the possibility to “lien strip” a second mortgage and subsequently have it discharged in bankruptcy, if your house or any other property is “underwater,” meaning that it is worth less than the outstanding balance of the first mortgage. This is done by treating the second mortgage as an unsecured debt. It is possible to do this only in chapter 13.

You should consider filing a chapter 13 plan if you:

Own your home, subject to a mortgage and want to keep it but are in danger of losing it because of financial problems;
Are behind on debt payments, but can catch up if given some time;
Have valuable property which is not exempt, but can afford to pay creditors from your income over time.

If you would like to learn more about a chapter 13 and whether it is right for you, feel free to call or contact our bankruptcy attorneys today. Let the lawyers at Rosen & Rosen serve you!

We are a debt relief agency. In addition to other legal services, we help clients file for bankruptcy relief under the Bankruptcy Code.