The Simplest Chapter 13 Case

What Does a Simple Chapter 13 Case Look Like?

Couple Calculating BudgetUnder Chapter 13, you and your attorney propose a payment plan based on your ability to pay. Through this plan you usually pay back only part of your debts, and sometimes only a small part of what you owe to at least some of your creditors, and possibly even nothing.

Your plan states how much you pay each month—usually much less than you were paying before. You pay that amount for a period usually covering three to five years. At at the end of that time you no longer owe any debts, except sometimes long-term ones like your home mortgage if you so choose, and other possible ones like student loans. The rest of the unpaid debts are discharged, or legally written off, and you are debt-free.

Your proposed plan is built around a detailed set of laws about how you must treat each kind of debt. If you have certain kinds of special debts called “priority” debts—such as newer income taxes or any child support arrearage—those would have to be paid in full over the life of your plan. Secured debts—your mortgage(s), vehicle and furniture loans—are treated in a special way, whether these are paid in full or in part depending on many factors. Debts that are neither “priority” or secured, are called “general unsecured” debts, and are usually paid only to the extent there is money left over to pay them during the span of time you are in the payment plan Especially with “priority” and secured debts, Chapter 13 can give you significant advantages over how these creditors are handled compared to Chapter 7.

Qualifying for Chapter 13

You must have a steady source of income to be eligible for Chapter 13–usually wages or self-employment income. But your income can also consist of unemployment benefits, Social Security income, or even rental or other investment income. The more consistent and predictable the income is, the simpler your case will be to put together, get approved by the bankruptcy judge, and successfully completed.

Simple But Powerful

Here are some potential benefits of even a straightforward Chapter 13 case, none of which are available under Chapter 7:

  1. Cure your mortgage arrearage, have up to 5 years to do so, while your home is protected from foreclosure.
  2. If your home is worth no more than your first mortgage balance, “strip” off a second (or third, or both) mortgage from your home’s title and no longer make those monthly payments.
  3. If your vehicle loan is more than two and a half years old and the vehicle is worth less than the debt you own, do a “cramdown” on that loan, which reduces both your monthly payment and the total amount you pay before owning it free and clear.
  4. Pay that portion of unpaid income taxes that can’t be discharged (the more recent tax years), based on your actual budget and in consideration of other creditors you’re paying, all the while being protected from tax collection by the IRS.
  5. Catch up on your child and/or spousal support arrearages while being protected from the very aggressive collection powers of your ex-spouse and the support enforcement agencies.

If you live in the Dallas-Fort Worth Metroplex, call me to determine if Chapter 13 is right for you. My name is Carrie Weir, a Texas bankruptcy attorney serving the Metroplex, especially the area around Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, and Rowlett. Please contact me for a free and confidential consultation, so that you can make an informed choice about your home and the rest of your finances. Call 972-772-3083 or use the contact form here. I look forward to helping you. Thank you.

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Call Rockwall bankruptcy lawyer Carrie Weir at 972-772-3083 or fill out the contact from below for a free, confidential consultation to discuss your options.

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