Chapter 13 Bankruptcy can fix what Chapter 7 can’t fix
Knowing when to file a Chapter 13 bankruptcy is important. Some bankruptcy lawyers claim they “only file chapter 7 cases” usually because they don’t understand Chapter 13 bankruptcy.
Filing a Chapter 7 bankruptcy when you really need a Chapter 13 can be disasterous at worst or result in lost opportunities at best. A Chapter 13 bankruptcy is not just for people who earn too much money to file Chapter 7 bankruptcy.
- STOP FORECLOSURES.
- ELIMINATE YOUR SECOND MORTGAGE IN MANY CASES!
- GET THE TIME YOU NEED TO CATCH UP YOUR MORTGAGE PAYMENTS OVER THREE TO FIVE YEARS.
- STOP IRS TAX LEVIES. GET THE TIME YOU NEED TO PAY BACK TAXES.
- ELIMINATE SOME BACK TAXES ENTIRELY. STOP EXCESSIVE TAX PENALTIES.
- CHAPTER 13 BANKRUPTCY CAN SAVE PROPERTY YOU MIGHT OWN THAT IS NOT PROTECTED IN CHAPTER 7
With Chapter 13 bankruptcy, you can restructure taxes at a very favorable interest rate. Some taxes don’t have to be paid at all.
In through a Chapter 13 bankruptcy reorganization plan, you can get your house out of foreclosure. In many cases, you can strip off your second mortgage meaning you get to keep your house without having to pay the second mortgage.
If you are one of the few bankruptcy candidates that has non-exempt property you will lose in a Chapter 7 bankruptcy filing, then Chapter 13 may be for you. Non-exempt property is property that isn’t protected by the long list of bankruptcy exemptions.
A Chapter 13 bankruptcy is a plan of financial reorganization. Contrary to popular belief, Chapter 13 does NOT mean that you must repay all your debt. Most Chapter 13 plans involve the repayment of about 20% (sometimes MUCH less, sometimes more) of your debts over a three to five year period. The debt that is not repaid is “discharged” or written off when you complete the bankruptcy repayment plan.
The “Rules” of Chapter 13 bankruptcy. Chapter 13 bankruptcy is based in part on your ability to repay. Simply put, the bankruptcy court looks at your net income minus your expenses in determining how much you must pay to your creditors every month.
However, under bankruptcy “reform”, your ability to repay is determined mainly by application of maximum “allowable” expenses established by the Internal Revenue Service’s collection standards.
As your Chapter 13 bankruptcy attorney, we know how to use the law to your advantage. This means that even though your expenses may be higher than the IRS’ idea of “average” we look for other allowable deductable expenses that help reduce your monthly Chapter 13 bankruptcy reorganization plan payment. Such expenses include, but are not limited to:
- 401(k) contributions up to the maximum you can contribute to your pl
- Daycare expenses
- Mortgage expenses over and above the presumed housing allowance
- Medical and life insurance expenses
- Mandatory payroll deductions
Before the summer of 2010, this was a lot of ambiguity regarding the size of your bankruptcy payment. The Chapter 13 Trustee argued that your payment had to be based on your last six months of income (means testing) instead of being based on your current income and ability to pay.
The U.S. Supreme Court shot down this unreasonable position in a decision called Hamilton vs. Lanning. Your bankruptcy payment now must be based on your actual current ability to pay — NOT entirely on your past income. More information on the Lanning decision is located here.