When Chapter 13 lawyers take on a case they will do a full review of the person’s circumstances including their mortgage, property, car loan and credit card debts. They also go over their income and assets.
The bankruptcy lawyer will work to create a realistic plan that will allow the client to cure their mortgage arrears, car loan and credit card debt over a five year period.
They Help You Avoid Mistakes
Generally, Chapter 13 allows debtors to repay all or a significant portion of their debt in 3-5 years under a court-approved repayment plan. When the court approves your plan, creditors must stop collection efforts. This includes phone calls, letters and garnishments.
Your attorney will help you determine whether your income is high enough to file for Chapter 13. They’ll also help you set up a budget that prioritizes your bankruptcy payments. They’ll advise you on what assets are exempt from liquidation or repossession, and what debts can be discharged.
A common mistake people make is taking on new debt shortly before filing for bankruptcy. Doing so may cause the court to dismiss your case altogether or refuse to discharge the debt. Your Chapter 13 lawyer will advise you to notify all debt collectors of your bankruptcy and provide them with your case number. They will also let you know about the exceptions for secured debts like mortgages.
They Help You Create a Repayment Plan
As soon as you file Chapter 13 bankruptcy, collection activities stop, and your lawyers will propose a repayment plan. It’s up to the court to approve your plan, which must be based on how much you can afford to pay. The plan must also address secured debts like mortgages and car loans, arrears on those secured debts, liens, and property taxes.
You must pay off the total amount you owe on secured debts through your plan term, but you can often reduce the amount you owe on some types of secured debtusing what’s known as a cram down. Your Chapter 13 attorney can explain the process during a free consultation.
Creditors can object to your repayment plan, but most objections are resolved through agreement. Once your lawyers submit the plan to the bankruptcy court, they will schedule a confirmation hearing. This typically takes place about 30-60 days after your meeting of creditors. During the hearing, the trustee and other creditors can ask you questions about your plan.
They Help You Get a Discharge
At the end of your Chapter 13 payment plan (which typically lasts three to five years) the court will discharge any remaining qualified debt. This includes credit card debt that falls into the nonpriority unsecured category, personal loans and uncollateralized mortgages. Older tax debt can also be discharged if you prove it isn’t a priority debt.
The discharge is a legally enforceable order that prevents creditors from taking action against you, including wage garnishment or foreclosure. Having this on your record can help you rebuild your credit much sooner than without it.
Additionally, a lawyer can often help you catch up on alimony and child support payments through Chapter 13. They may also be able to get some of your secured debts reduced or even completely eliminatedpaying them over time. They will ensure that you meet all deadlines and complete all required paperwork. In addition, they can ensure that you have sufficient income to cover your debts.
They Help You Keep Your Property
When you file for Chapter 13, the court reorganizes your debt into a three to five-year repayment plan. Your attorney will calculate your disposable income and your necessary expenses to help you determine the amount that you can afford to pay each month.
The court will review the plan and approve it. Then, your creditors cannot sue you or garnish your wages. It also prevents foreclosure and repossession and lets you make up mortgage payments that are behind and catch up on car loans. It also has provisions that may protect co-signers on consumer debt.
You can usually keep your property, except for items deemed non-exemptthe trustee. This can include your home, your car and tools used for work. Once your bankruptcy is discharged, you can start rebuilding your creditusing credit cards and personal loans responsibly. It can be a much better alternative to continuing to accumulate more debt or letting your credit deteriorate.