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Chapter 13 Bankruptcy

by | Nov 21, 2019

PERSONAL REORGANIZATION
Chapter 13 Bankruptcy is referred to as a “reorganization” because it enables individuals to consolidate their debt and reorganize it into an affordable monthly payment plan approved by the court.
Chapter 13 Bankruptcy does not completely erase a person’s debt, but consolidates the debt and restructures it into a monthly payment plan that the consumer can afford. At the end of a three to five year repayment period, the remaining balance of the unsecured debt is discharged (eliminated). When the court awards a chapter 13 Bankruptcy filing, the debtor pays for living expenses first, and then any money left over is used to repay creditors, even if it’s just pennies on the dollar. The debtor is thus able to pay off their debts in affordable monthly payments over a period of three to five years, depending on their disposable monthly income, expenses, and assets. Chapter 13 Bankruptcy cases typically last for three to five years from the date of the initial filing to the date the remaining debts are discharged.

Consolidate Late Payments

A Chapter 13 Bankruptcy enables Consumers to consolidate their mortgage arrearages, balances on car loans, student loans, credit card debts and other unsecured debts. All of the debtor’s outstanding debts must be included in the Chapter 13 Bankruptcy consolidation. Many individuals find a Chapter 13 advantageous because they can consolidate student loans and taxes with their other bills and pay them over time, thus stopping collection actions even if some of these obligations cannot be discharged in a Chapter 7 Bankruptcy. A Chapter 13 Bankruptcy will also stop the finance company from repossessing your car. Your past due car payments will be consolidated with the entire balance on your vehicle loan so you can pay it all off over the next three to five years.

Missed Mortgage Payments

Additionally, if your home is currently in foreclosure, a Chapter 13 Bankruptcy filing will stop the foreclosure any time prior to the sale, and allow you to repay your mortgage arrears through your Chapter 13 Bankruptcy. You will still be obligated to make all future mortgage payments, but your lender cannot foreclose to collect any outstanding mortgage payments. This is because a Chapter 13 filing allows you to consolidate all of your missed mortgage payments or “arrears” and then repay them over 3 to 5 years. For example, if you are $12,000 behind on your mortgage, and your regular house payment is $2,700, then under a Chapter 13 plan your mortgage payment would be your normal $2,700 payment plus approximately $200 ($12,000 ÷ 60 months) to repay the arrears. Consequently, if you are in default, the Federal Court reinstates your mortgage so that the lender cannot foreclose while you are under its protection and making your payment under the court approved plan.

Eliminate Junior Liens

The court also strictly scrutinizes any fees the lender tries to impose on top of your normal mortgage payment. Consequently, a Chapter 13 program may result in a more favorable repayment plan than those offered by lenders through their loan modification programs. In some situations, you can even eliminate the lien from your second and third mortgages. This is known as lien stripping.

Creditor Meeting

About a month after you file for a Chapter 13 reorganization, you will be required to appear before a judge and a court-appointed trustee. At this appearance, the trustee and the judge want to make sure that you understand the amount of payments you must make and that you have the ability to pay them. However, while you are in an interest-free Chapter 13 repayment plan, your creditors cannot collect from you. Your creditors are forced to accept the amount allocated to them by the Court.

Contact an Experienced Chapter 13 Bankruptcy Lawyer

If you are facing overwhelming financial troubles, it is crucial that you contact an experienced bankruptcy attorney to help you eliminate this crushing debt.

Contact us today by calling (949) 450-8500 for your FREE consultation.

I wish I have the right words to describe my exceptional experience with Grant Hallstrom and his incredible team. When time comes to count on someone reliable to understand your situation and help you going through challenges, Grant is the best ally. The level of expertise and professionalism reflect the outstanding result from a desperate situation to a life changeing experience. I couldn’t be more grateful for what he did for my family and my business. Very humbly, thank you Grant.

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HALLSTROM KLEIN & WARD LLP
IRVINE, ORANGE COUNTY, CA
(949) 450-8500
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