A Chapter 13 Bankruptcy can do everything a Chapter 7 can - only better. Chapter 13 has more tools to deal with a wider variety of problems a Chapter 7 can’t solve. A Chapter 13 can ensure a mortgage is caught up over time. It may be you can’t qualify for chapter 7 yet. Perhaps you filed another Chapter 7 less than eight years ago. A Chapter 13 can manage or cure a defaulted secured debt.
Chapter 13 Benefits
- The Chapter 13 special benefits and tools a Chapter 7 doesn’t have, includes:
- The ability to strip and remove a Second Mortgage if the Second Mortgage has no equity;
- The ability to modify vacation and commercial mortgages to their value.
- A Chapter 13 can protect property when you have too much equity and would lose it in Chapter 7. Assets that would have been lost in Chapter 7, can be kept in Chapter 13 but you have to repay what a Chapter seven would have;
- A Chapter 13 can protect a cosigner
- A Chapter 13 is voluntary. You can dismiss it. You cant dismiss a Chapter 7 if the Trustee doesn’t allow it.
- You can eliminate or manage debts that are non-dischargeable in a 7. Even non-dischargeable debts are stayed from collecting while bankruptcy is ongoing. Income taxes, domestic support, taxes and student loans can be repaid or managed. Student loan and tax garnishments are stopped even if they are not discharged.
- Priority debts are repaid at the expense of unsecured debts often with no or reduced interest or penalties;
Note, there is a cost – if you want to take advantage of the benefits chapter 13 gives you, you commit your disposable income for 3-5 years to repayment.
Bankruptcy is often caused by a temporary event. It is often caused by one of the 4Ds - Divorce, Disability, Death in the family, job loss. Often all you need is time, and you will be able to deal with your debts and put your finances back in order. That is what Chapter 13 provides time. Often you just need time to get your mortgage modification. Chapter 13 gives you that time.
The temporary court order that stops collections is not so temporary in Chapter 13. The protection of the stay which stops collections lasts for 3-5 years. During that time the debt is often charged off or sold to another debt collector. The debt goes away. Often nothing is repaid in Chapter 13 to unsecured debts. Ten percent or less repayment plans are common. Zero percent is possible. However, the secured and priority debts must be paid or brought up to date.
Not only does a Chapter 13 bankruptcy allow you to catch up a mortgage or auto loan, but it can be used to pay back income taxes or provide temporary relief from student loans while eliminating credit card and other unsecured debts.
Half the attorneys who prepared Chapter 13 cases quit in 2005 when the law changed. The new law required detailed and accurate petitions supported by documentation. In California, well over 50% of the petitions filed since then have failed. Bankruptcy is not an area of the law where you can file a sloppy petition.
After 2005 it changed again in December 2015 and December 2017 to even harder, longer and more detailed plans and formats. Filing chapter 13 is complicated. Attorney fees in Chapter 13 are set by the court. Every attorney is paid the same fee. It costs you nothing extra to use the best-rated attorney. We have already helped thousands of others, let us help you, too.