A More Complicated Chapter 13 Case

A More Complicated Chapter 13 CaseIn the absolutely simplest Chapter 13 case you pay a monthly amount each month based on what you can afford and it’s divided prorata among your unsecured debts. So, say, you pay $300 for 36 months, and all of your debts are paid 20% of what you owe, and at the end of the case all the remaining debts are discharged—written off.

But Chapter 13 generally does SO much more than that. It is a tremendously flexible and powerful option. It’s like a toolbox full of many helpful tools. Here is just a sampling of a few of the most important ones.

Pay Important Debts First

Chapter 13 gives you numerous ways to favor creditors that you want to favor. It’s not that you get to favor them simply because you want to. Rather the law happens to favor those creditors for various reasons.

For example, if you are behind on your home mortgage and want to catch up, you are allowed to make monthly catch-up payments ahead of just about all your creditors. Or if you are behind on your child support payments, you are allowed to pay that arrearage before paying anything to your “general unsecured” creditors—ordinary credit cards, medical bills and such. And you don’t just pay these mortgage or support arrearage ahead of other debts, you often pay them instead of those other debts.

Another good example of this is with income taxes. Through your Chapter 13 plan you are required topay in full those “priority” taxes (generally the newest ones) that would generally not be discharged in either a Chapter 7 or 13 case. You pay these in full before you pay anything to most other debts.

In practice this means that often you get to pay the taxes that you would otherwise have to pay anyway, but do so based on a sensible budget. And you do so usually without paying any more interest or penalties from the time your case is filed, all the while being protected from the IRS.

Save Your Home from Foreclosure.

  • Stop foreclosures and then get 3 to 5 years to cure your mortgage arrears.
  • Strip off any second and third mortgages which have no equity.
  • Be given time to pay property taxes, protecting you both from the taxing authority and your mortgage lender in the meantime.
  • “Avoid” judgment liens, taking them off your title forever.
  • Get releases of other liens against your home’s title, either after paying off debts that can’t be discharged like child support or else discharging those that can be, like certain old income tax liens.

“Cram Down” Vehicle and Other Secured Debts

Chapter 13 may allow you to effectively re-write your vehicle loan under much better terms. If your loan is more than two and a half years old, and you owe more on the debt than the vehicle is worth, Chapter 13 allows you to reduce the loan’s balance down to the vehicle’s value. The interest rate can often also be reduced, and sometimes the length of the loan is extended. All of these can reduce the monthly payment amount significantly. The result is often a savings for you of thousands of dollars. Then at the end of the case the vehicle is yours free and clear.

This is also true of secured debts with other kinds of collateral, such as furniture and appliances, as long as the loan is more than one year old.

This is just a short sampling of the ways that Chapter 13 can help with some of your most important debts. Let me, bankruptcy lawyer Carrie Weir, show you how to put this toolbox of tools to work for you. If you are in the Dallas-Fort WorthMetroplex, contact meat 972-772-3083 to discuss your options. Most of my clients live or work in and aroundRockwall, Heath, Greenville, Lavon, Wylie, Mesquite, Royse City, Sachse, or Rowlett, Texas. I can provide you a free and confidential consultation. If you want to contact me outside of business hours,you can use this this contact form.

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