What You Need to Know About Chapter 13
Detroit Chapter 13 Attorneys with Over 45 Years of Combined Experience
If you are considering filing Chapter 13, you are going to want to familiarize yourself with the chapter before getting started. From allowing debtors to save a home from being foreclosed upon, to allowing debtors to consolidate their debt into one affordable payment, Chapter 13 has many advantages.
At the Law Offices of Marshall D. Schultz, we want to give you all of the necessary information to help you determine if Chapter 13 is best for you. With over 45 years of collective experience handling Chapter 7 and Chapter 13 bankruptcies, you can be confident that your case is in very good hands.
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- We offer FREE case evaluations
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We have compiled some important information about Chapter 13 bankruptcy, including:
- Why Chapter 13 is better for some people - Some debtors own a home and don't want to lose it. Unlike Chapter 7, Chapter 13 allows debtors to save their homes from foreclosure. With this chapter, debtors can stop foreclosure and cure their delinquent mortgage payments over 3 to 5 years.
- You have to meet these requirements to file - To be eligible to file a Chapter 13, your unsecured debts must meet a certain minimum, but not be above a certain amount.
- 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."
- What does the automatic stay do? - 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.
- When you have substantial 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 Chapter 13 treats first mortgages - Under the 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.
- Advantages of 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.
- Car loans become more affordable - 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).
Are you interested in learning more about the advantages of filing a Chapter 13 bankruptcy? Contact our office today to schedule a free consultation with one of our Detroit bankruptcy lawyers!
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