What You Should Know About Chapter 13 Bankruptcy
Many Hoosiers struggle with credit card, medical bills, and other unsecured debt. Chapter 7 might be a good option for these individuals. This form of bankruptcy discharges such debts in only a few months.
If mortgage delinquency, past-due auto loan payments, and other secured debts are a problem, a wage-earner plan might be a better alternative. Chapter 13 gives debtors up to five years to catch up on these payments. So, when the bankruptcy case ends, the family has a zero past-due balance on all secured debts. That’s the very definition of a fresh financial start, which is what the Bankruptcy Code guarantees.
Chapter 13 and the Automatic Stay
Generally, as soon as debtors file their voluntary petitions, Section 362 of the Bankruptcy Code takes effect. Since it remains in force as long as the bankruptcy is pending, creditors cannot take any adverse actions for up to five years. These actions include:
- – Collection lawsuits,
- – Wage garnishment,
- – Harassing phone calls,
- – Repossession, and
- – Foreclosure.
Typically, moneylenders can only get around the stay if the judge grants special permission. That permission usually only comes if the debtor threatens the collateral, like posting an intent to burn down the house on Facebook.
As the name implies, the Automatic Stay is automatic. Debtors need not establish fault, negligence, or anything else to take advantage of Section 362.
Exempt Assets in a Bankruptcy
Asset exemption is an important part of the aforementioned fresh start. If debtors lose their possessions, they must go back behind the starting line. That’s not the intent of the Bankruptcy Code. Some common exemptions in a Chapter 13 often include:
- – Home equity,
- – Social Security and other government benefits,
- – Retirement account,
- – Savings account,
- – Vehicles, and
- – Personal property.
Many of these exemptions are value-based. For example, the law only protects a certain amount of home equity. Fortunately, an experienced attorney knows how to maximize financial exemptions. Additionally, if the trustee (person who oversees the bankruptcy for the judge) tried to seize property, an attorney advocates for you.
The protected repayment plan may be the most important aspect of a Chapter 13 bankruptcy. Instead of paying what the moneylender demands, bankruptcy debtors repay secured debt delinquency as their income dictates.
The lead-up to the protect repayment plan is a collaborative process. Essentially, the trustee places the debtor on an allowance. After they pay necessary expenses, debtors give their disposable income to the trustee, who distributes it among secured creditors.
Since the Automatic Stay remains in effect, the moneylenders must be patient and wait for their money. For the most part, they cannot even communicate with debtors who are in bankruptcy.
If the monthly debt consolidation payment is too high, an attorney gives debtors options. A lawyer can negotiate with creditors and obtain more favorable repayment terms. Alternatively, an attorney could convert the Chapter 13 to a Chapter 7. That way, debtors get their fresh start a lot faster.
Reach Out to Dedicated Lawyers
If you have past due secured debts, you should consider Chapter 13. For a free consultation with an experienced Chicago Chapter 13 bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.