The Advantages Of A Chapter 13 Bankruptcy
A Chapter 13 bankruptcy offers clients an advantage over other chapters of bankruptcy. This type of bankruptcy gives clients more options to save their homes or other real property, the possibility to adjust their car payments, certain debts can only be discharged in a Chapter 13 bankruptcy and non-dischargeable debts such as taxes can be paid out over five years. A Chapter 13 client will generally pay a substantially reduced amount to general unsecured creditors while retaining their assets.
- Save your home: A Chapter 13 is a payment plan allows several ways for clients to save their homes or other real property. During the recent decline in home values, many homeowners found their homes where worth less than their first mortgages. These homeowners also had second and sometimes third mortgages. In a Chapter 13 bankruptcy, a homeowner may be able to remove (“strip off”) these second and third mortgages. These mortgages will then be treated as unsecured debt. Also, if client is behind in their first mortgage, a Chapter 13 Plan can allow the client to pay the past due amount in equal payments over 60 months while paying their normal monthly mortgage payments. This will allow the client time to repay the past due amount.
- Reduce your car payments: In some cases, clients have purchased vehicles that have high interest rates and/or years later are worth much less than the amount owed. If a vehicle is owned for more than 910 days, then the client maybe able to reduce the amount owed to the value of the vehicle and/or reduce the interest rate.
- Pay taxes, child support and alimony over time: There are certain debts such as domestic support obligations (child support and alimony) and taxes owed to the IRS that can be paid over the life of the plan. This can give the client some much needed breathing room as it avoids contempt orders on the past due support obligations and tax liens in the case of taxes. Clients will need to keep up with their post-bankruptcy filing domestic support obligations and taxes.
- Certain debts only dischargeable in Chapter 13: There are certain debts that can only be discharged in a Chapter 13 bankruptcy. For instance, a non-domestic support obligation that was incurred in a divorce or post-divorce proceeding can only be discharged in a Chapter 13 bankruptcy. Debts that are just in the nature of equitable distribution and some awards of attorneys’ fees can be discharged in a Chapter 13 bankruptcy. Debts that arise from willful and malicious injury by the debtor to the property of another person or entity can only be discharged in a Chapter 13 bankruptcy.
- Keep your property while paying a substantially reduced amount to general unsecured creditors: A Chapter 13 debtor can keep their non-exempt property while, often, paying a substantially reduced amount to their general unsecured creditors, i.e. credit card, medical, and non-domestic support obligations. A Chapter 13 client must devote their disposable monthly income to the plan. This is generally determined by taking their gross monthly income and subtracting their average monthly expenses. This amount must be more than their non-exempt property. Exempt property are assets that are protected from creditors under Florida or federal law. Non-exempt property is all other property owned by the client. These two tests will generally allow clients to pay much less than what is owed to their general unsecured creditors while allowing them to keep their assets.
Are You Facing A Serious Debt Situation?
Since the choice between Chapter 7 and Chapter 13 bankruptcy should be an informed decision, it is important to get competent legal advice before proceeding. The experienced bankruptcy lawyers at FurrCohen, P.A. can assess your situation and recommend the best way out of your debt problems.
Please contact our Boca Raton, Fl office to speak with our bankruptcy lawyers, call 561-395-0500 or contact us online.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.