Detroit Chapter 13 Attorney
Marshall D. Schultz Helps You Understand How Chapter 13 Bankruptcy Works
Bankruptcy is not only for people with little or no income. If your current debt outweighs your ability to pay, you can seek relief through Chapter 13 bankruptcy. This option allows individuals who are not qualified for Chapter 7 an opportunity to get their debts under control. It is not as sweeping as Chapter 7, but Chapter 13 bankruptcy has advantages and benefits such as being able to catch up on delinquent mortgage payments over a period of up to 60 months.
A Detroit Chapter 13 bankruptcy lawyer from our firm can advise you of your options and help you begin work on the petition to file under Chapter 13. The Law Offices of Marshall D. Schultz is dedicated to representing clients who are determined to get out of debt, and with a track record that includes more than 10,000 consumer bankruptcies, we know how to get results.
What is Chapter 13 Bankruptcy?
Chapter 13, which is commonly referred to as "a wage-earner plan," is a way of restructuring a full or partial repayment of your debts according to your ability to repay. Your Detroit Chapter 13 Bankruptcy attorney will evaluate your financial needs to find an amount which you can reasonably afford to pay, while still maintaining your rent or mortgage, groceries, utilities, clothing, car payment and maintenance, recreation, insurance, etc.
After deducting all of these normal expenses from your overall income, the amount remaining, which is more commonly referred to as the net disposable income, is committed to a monthly payment plan. Whether or not you end up repaying all of your debt, you will be released from further obligation at the end of your payment period.
Is Chapter 13 Bankruptcy Right for Me?
Chapter 13 bankruptcy will require you to make continued payments on your debts, unlike Chapter 7 which leads to a rapid discharge of debts, but it is potentially more effective for the debtor. A Chapter 7 bankruptcy will not affect a mortgage or car loan, but under Chapter 13 the individual is often given the chance to restructure a delinquent car loan and to catch up on mortgage payments that are past due. You may also be able to strip a second mortgage lien from your home if the house is worth less than the first mortgage.
We will teach you what you need to know about Chapter 13, and our Detroit Chapter 13 bankruptcy attorney will do everything we can to help you take full advantage of your rights so that you can begin life after bankruptcy in a position of financial stability.
Answers to Your Chapter 13 Bankruptcy Questions
What Requirements Must Be Met to File for Chapter 13?
There are several requirements for filing Chapter 13 bankruptcy. First, it is important to know that businesses cannot ever file for Chapter 13 bankruptcy. Stockbrokers and commodity brokers are also ineligible, even for personal debts.
Individuals with demonstratable means to repay their debts can file, as long as their unsecured debts fall under a maximum. This maximum changes periodically, so you should consult with an attorney if you have concerns about your unsecured debts before filing for Chapter 13.
Additionally, if you have filed a previous bankruptcy, you may need to wait a period of time before filing again. You need to wait two years after filing for Chapter 13 and four years after filing for Chapter 7 before a second bankruptcy filing with Chapter 13.
How are Chapters 7 and 13 different?
Chapter 13 is more complex than a Chapter 7. While Chapter 7 is reserved for individuals with a low income, Chapter 13 is known as the "wage earners" bankruptcy. With a Chapter 13, the debtor pays off a portion or all of their debts over 3 to 5 years, whereas with a Chapter 7, qualifying unsecured debts are "wiped out." This means that certain non-dischargeable debts, like alimony and child support, can be paid off over the 3 to 5-year payment plan period.
In addition, different debts can be discharged in Chapter 13 vs Chapter 7 after the completion of the payment plan. These debts are variable according to state law, so it is best to consult with an attorney on your potential dischargeable debts with Chapter 13.
Will I Lose My Assets and Property When I File for Chapter 13?
Chapter 13 is the most feasible bankruptcy option for any individual wanting to retain possession of his or her assets and property. In Chapter 13 you do not discharge all of your qualifying debt; you simply restructure it so that it can be paid over a 3- to 5-year period. You will have a far greater chance of retaining your assets, avoiding foreclosure and maintaining your current lifestyle if you file for Chapter 13 rather than Chapter 7.
Is Chapter 13 the Same as Debt Consolidation?
The primary difference between debt consolidation and Chapter 13 is that in a Chapter 13 bankruptcy creditors are required by the court to follow the terms laid out in the debt settlement agreement and repayment plan. In standard debt consolidation, a creditor has no obligation to agree to the terms being proposed. Debt consolidation agreements can and will also include continually accruing interest, whereas no further interest will accrue during a Chapter 13 repayment plan.
What Does an Automatic Stay Do in Chapter 13?
Once you file for bankruptcy, the "automatic stay" immediately goes into effect. The automatic stay stops all collection activity dead in its tracks. This means that creditors aren't allowed to call you, send you letters, continue a foreclosure action, or file any lawsuits.
Can Chapter 13 Help with Back Taxes?
Do you have substantial back taxes? Chapter 13 allows you to pay them off over 3 to 5 years rather than paying them all off at once.
How Can Chapter 13 Help With a First Mortgage?
Under Chapter 13 laws, you must pay the mortgage on your primary residence and it cannot be modified. However, Chapter 13 does allow you to make up the arrearages over the course of your plan. In such cases, your plan will likely include your normal monthly payment along with the amount needed each month to pay off your past-due balance.
What is Lien-Stripping?
If your first mortgage is upside-down and you have a second mortgage, a Chapter 13 may allow you to eliminate the second mortgage through what is called "lien stripping." If the house is worth less than your first mortgage, the court could convert your second mortgage into unsecured debt. While you may have to pay some of your second mortgages through the plan, it will be treated the same as other unsecured debt such as a credit card.
Can Filing Chapter 13 Help with Car Loans?
Your auto loan will be treated in one of two ways depending upon the age of the loan. If the loan is 2.5 years or less, you can reduce the interest to 5.25% and stretch the payments over the life of the repayment plan. If your loan is older than 2.5 years, the loan can be reduced to the actual value of the car and you can pay that amount through the plan. For instance, if your loan balance is $20,000, but your car is worth $15,000, you would only need to pay the $15,000 (the value of the vehicle).
Contact the Law Offices of Marshall D. Schultz so that we can work with you towards a brighter future! We have offices in both Southfield and Detroit.
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