Chapter 13 Bankruptcy

What Are the Benefits of Chapter 13 in Louisville Kentucky?

A Chapter 13 Bankruptcy in Louisville can do everything a Chapter 7 can only better. A Chapter 13 has special benefits and tools a Chapter 7 doesn’t. But there is a cost. You commit all your disposable income for 3-5 years to do what a Chapter 7 can’t. These benefits include:

  • The ability to strip and remove a Second Mortgage if the Second Mortgage has no equity.
  • A Chapter 13 can protect property when you have too much equity. Assets that would have been lost in Chapter 7, can be kept in Chapter 13 as long as you pay what a 7 would have;
  • You can eliminate or manage debts that are non-dischargeable in a 7. Even nondischargeable debts are stopped from collecting while a bankruptcy is ongoing. Income taxes, domestic support, and student loans can be repaid or managed;
  • Priority debts are repaid at the expense of unsecured debts often with no or reduced interest or penalty;
  • Chapter 13 provides bankruptcy protection when a Chapter 7 is not possible. For example when the Debtor finished a Chapter 7 less than 8 years ago.  You can file a Chapter 13 the day after your Chapter 7 discharge.
Chapter 13 bankruptcy in Louisville

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Chapter 13 Benefits for Mortgages

Chapter 13 has special benefits for Mortgages and foreclosures.  

  1. Filing a Chapter 13 can delay a foreclosure long enough to modify the mortgage.
  2. You can challenge Mortgage claims and fees. 
  3. You can strip a second mortgage which has no equity on your primary residence. 
  4. Non-residential mortgages on commercial and vacation properties and second homes can be modified.
  5. You can catch up a mortgage over time up to 5 years.

Chapter 13 Benefits for Auto loans

A Chapter 13 can:

  • stretch out and lower car loan payments.
  • You can fully protect a cosigner.
  • Stop or recover a reposession
  • It can lower the interest rate of an auto.

You can also reduce the principle amount owed on a car loan to the retail value if:

  • The loan was not solely for buying the auto or
  • Тhe loan is over 910 days old or
  • The vehicle is used commercially

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Chapter 13 Bankruptcy Cost

A Chapter 13 filing fee is $310.00 plus mailing costs for the plan for a final cost of $335.00.  If the case is being filed to stop a foreclosure sale, the court requests us to collect the first couple of plan payments. If you demonstrate you are willing and able to pay into the plan it makes the plan more likely to be feasible and more likely to be approved.

The court pays attorney fees from payments that are made into the plan. You pay the same amount to have the most or least experienced attorney. The petition and plan is long, detailed and difficult to prepare. Over 90% of persons who attempt to file themselves (pro se) have their cases dismissed. Knowing the code allows experienced attorneys to take advantage of the exemptions and rules to reduce the amount which has to be repaid.

Half the attorneys who prepared Chapter 13 cases quit in 2005 when the law changed and required detailed petitions. After 2005 it changed again in December 2015 and December 2017 to even harder, longer and more detailed plans and formats.

Managing Student Loans with Chapter 13

Filing a Chapter 13 will stop private student loan collections. The statute of limitations does not run during a bankruptcy. Kentucky has a 15-year statute of limitation and repaying anything to a debt restarts the waiting period. However, a plan which repays 0 percent does not repay a student loan and often by the time 5 years has run the creditor has lost interest in attempting to collect any further.

Important Facts About Chapter 13

Little or nothing is often paid back to unsecured debts in a Chapter 13 plan. Plans can repay 10% or less to unsecured debts. Paying 70% or 100% can give you benefits but planning your bankruptcy with an experienced attorney allows you choose which Chapter or what kind of plan is best for you.   Make sure a Chapter 13 is filed because it is best for you; not because a 13 is  most profitable for your attorney. 

After a Chapter 13 is filed, it may be later modified or converted to a Chapter 7. If a Debtor cannot qualify immediately for a Chapter 7, he may choose to file a Chapter 13 and convert later to a Chapter 7. When a Debtor has a medical condition and will continue to have more debts you may want to file a 13 and convert later.

If you have an average income and little in assets you probably want to file a Chapter 7. The exemptions that allow you to keep property change from state to state. Over half the states like Kentucky use the federal exemptions. The manual on how to file for Bankruptcy that explains step-by-step how to file bankruptcy with your lawyer to the best of your advantage.

Priority non-dischargeable debts such as income taxes, student loans or child support are repaid first in Chapter 13, tax penalties, secured debts are paid next, and unsecured debts are paid last. Interest charges which accrue during the Chapter 13 can generally be discharged. In many cases, only the principle on the income taxes must be repaid in Chapter 13.

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