Helping People Keep Their Debt Payments Affordable
Are you concerned about losing your home to foreclosure or your car to repossession because you cannot keep up with your payments? Did you go through a period of racking up credit card debts or medical debts that are now interfering with your regular monthly expenses? If so, Chapter 13 bankruptcy may be right for you.
At the Law Office of Jeff D. Hoffman in Oakland, we offer skilled counsel on Chapter 13 bankruptcy and represent clients who decide to file. Contact us to schedule a free consultation with Bay Area attorney Jeff D. Hoffman.
Getting Relief From Serious Debt Consequences
Chapter 13 bankruptcy is a procedure that allows you to propose a payment plan to repay certain debts over a period of three to five years. If your plan is approved, your monthly payments will go to a bankruptcy trustee appointed by the court.
One of the biggest benefits of Chapter 13 bankruptcy is the ability to stop home foreclosure and car repossession in their tracks and spread out your arrearages (late payments) under the payment plan.
In addition, up to 100 percent (depending on your disposable income) of your credit card debts, doctor and medical bills and other unsecured debts can be eliminated, and in some circumstances, car loans and real estate debts can be reduced.
Reducing House and Car Payments
Because of the recent housing market crash, many homes are worth less than the outstanding balance of the first mortgage. If you owe more for your first mortgage than your house is worth, you can probably eliminate ("strip") your junior mortgages, so that you no longer have to pay them. This usually results in substantial savings.
Because cars depreciate in value quickly, most are worth substantially less than what people owe for them. If you bought your car at least 2 1/2 years ago or have refinanced it, you can probably lower the amount you owe on the car to what the car is worth, lowering your monthly car payments. Again, this often results in substantial savings.
Investment Property and Vacation Homes
If you have other real property that is not your principal residence and that property is worth less than what you owe on the first mortgage, you may be able to lower the amount of the first mortgage to what the property is worth, just like you can for a car. This is in addition to stripping junior mortgages as described in the section above. Unlike a car, there is no 2 1/2 year waiting period, so it does not matter when you bought the real estate. Doing this can save you hundreds of thousands of dollars! You must be able to pay the new, lower amount of debt in full in your bankruptcy payment plan, and that plan may not be longer than five years.
Qualifying for Chapter 13
In order to qualify for Chapter 13 bankruptcy, you need enough regular income to make your home and car payments, as well as whatever amount you owe to the bankruptcy trustee under the payment plan.
There is a limit to how much debt you can have and still be able to file a Chapter 13. If your debts are too high to file a Chapter 13, the only way to save your house from foreclosure or your car from repossession through bankruptcy is to file a Chapter 11, which is normally done by businesses but which can also be used by individuals. However, be forewarned that Chapter 11 filings are very expensive and complicated.
Also, if you have had debts discharged in a Chapter 7 within the past four years or a Chapter 13 within the past two years, you will not get any of your debts discharged in a new Chapter 13. However, you may still save your house from foreclosure and/or your car from repossession if you can make the payments.
Preparing for All Possible Chapter 13 Outcomes
Many people are successful at keeping up with their Chapter 13 bankruptcy payment plans, especially people whose original financial problems were caused by temporary situations, including illness and/or temporary unemployment. However, if you are partway through a Chapter 13 bankruptcy and find yourself unable to make your trustee payments, you do have options.
Under some circumstances, it is possible to negotiate an extension of the payment plan with the trustee. If not, you may convert to a Chapter 7 bankruptcy. In Chapter 7, you may not be able to keep your home or car, but you will not be liable for the amount you owe above what your house and/or car is worth, and you will have your unsecured debts discharged.
If you are unsure whether you would be successful with a Chapter 13 payment plan, contact us to discuss your options with a knowledgeable bankruptcy lawyer.
