Breaking Down A Chapter 13 In Indiana
Coronavirus mortgage deferrals have helped tens of thousands of homeowners stay in their homes during a very difficult period. But once these programs expire, if you are still behind on payments, the bank can immediately foreclose on the loan. So, if you are still suffering from the lingering financial effects of coronavirus lockdowns, you must probably take emergency measures to prevent foreclosure.
Chapter 13 bankruptcy could be the appropriate emergency measure in this situation. As outlined below, a Chicago Chapter 13 bankruptcy attorney can do more than stop adverse creditor actions, such as foreclosure. The law gives these debtors up to five years to erase delinquency and get a fresh start. As a bonus, Chapter 13 also eliminates most unsecured debts. Imagine what your family can do with the hundreds of dollars a month you currently spend on credit card bills and other unsecured obligations.
Qualifying for Chapter 13
Most people meet the formal qualifications for Chapter 13. Debt ceilings apply, but the ceilings are so high that almost everyone is underneath them. These debtors must have less than $1.4 million in home loans and other secured debts, and less than $400,000 in medical bills and other unsecured debts.
In the unlikely event that you are above these ceilings, alternatives are available, such as debt negotiation. A Chicago bankruptcy lawyer can use the threat of bankruptcy to obtain a favorable payment arrangement. The creditor doesn’t know that the filing threat is an empty one.
There are some informal qualifications as well. Generally, the trustee (person who oversees the bankruptcy for the judge) wants the debtor’s monthly income to well exceed monthly expenses. Being in the black demonstrates the ability to make a monthly debt consolidation payment. More on that below.
The Automatic Stay and Protected Repayment Period
As soon as debtors file their voluntary Chapter 13 petitions, Section 362 of the Bankruptcy Code instantly prevents adverse creditor actions, such as:
- Wage garnishment,
- Creditor harassment, and
The Automatic Stay lasts up to five years in a Chapter 13. Creditors can only bypass Section 362’s directives in extremely limited situations.
About six weeks after the filing date, the debtor and the debtor’s Chicago bankruptcy lawyer meet with the trustee. At this meeting, the trustee helps the debtor set up a monthly debt consolidation payment. This payment takes care of allowed claims, mostly secured debt arrearage, and some other costs, like administrative fees.
Since the Automatic Stay remains in place, creditors cannot pressure debtors to repay more money above minimum legal requirements or to pay it faster. Instead, they must accept the income-based repayments and wait in line for their money like everyone else.
Chapter 13 Endgame
At the end of a Chapter 13, the debtor has a zero past due balance on secured debts like a home mortgage and vehicle loan. That’s the essence of the fresh start which the Bankruptcy Code guarantees. Additionally, the court automatically discharges most unsecured obligations.
“Discharge” means the judge eliminates the legal requirement to pay an obligation. But the debt itself remains, as do any collateral consequences, such as a credit or property lien. An attorney must deal with these matters separately.
Most former Chapter 13 debtors do not have a hard time raising their credit scores. On-time secured debt payments make up a significant portion of a FICO or other credit score. Additionally, responsible credit use, such as charging a few hundred dollars a month on a credit card and promptly paying the bill, raises credit scores even faster. As a result, by the time the filing falls off their credit reports, many former Chapter 13 debtors have forgotten they filed in the first place.
Connect with Dedicated Cook County Lawyers
Chapter 13 could be the solution to your family’s financial emergency. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.