A Chapter 13 Bankruptcy, also known as a “Reorganization”, is a powerful tool that can help you get caught up on secured debts, protect assets, and eliminate or minimize certain debts. A Chapter 13 is a reorganization over a three to five year period.
Once a bankruptcy is filed, something called the “Automatic Stay” is invoked. That means that all collection activity must cease. From a practical standpoint this means that the harassing phone calls will stop within a day or two of filing. Any collection activity such as the continuation of lawsuits, foreclosures, or vehicle repossessions are halted unless the creditor asks special permission from the court by filing what is called a “Motion to Lift Stay”. In a case where you plan to abandon a property or vehicle this might be the desired result. For example if you have purchased a used car and financed it through a sub prime lender, this might be a great time to surrender that vehicle and get a new one. Most collection lawsuits are non-suited or abated upon filing. Full disclosure with your attorney is very important as we need to make sure that the courts, creditors, and opposing counsel are advised of the Bankruptcy filing.
Once a Bankruptcy is filed, a proposed plan for repayment of debts is submitted to the court. This plan is based upon your income, current secured debts such as your mortgage and car payments, certain allowances for your various needs such as utilities, groceries, insurance, medical fees, and so forth, the amount of fees that you owe your attorney, the amount of arrearage that you have on any secured debts, and the presence of any priority debts. Priority debts are debts such as taxes, student loans, or domestic support obligations (child support, alimony, etc.) that do not have collateral associated with them, but are not generally dischargeable in bankruptcy. Only after all of these debts are accounted for do the unsecured creditors such as medical debts and credit cards get a pro rated share. To even qualify for that share unsecured creditors must file a claim with the court, and in certain circumstances you might be able to object to those claims and get them thrown out.
Payments for the plan are then automatically debited from your checking account, and distributed accordingly. The beauty of a Chapter 13 is that you are paying back creditors on your terms, based on your ability to pay, and with oversight of the Court. You are no longer subject to monthly $39.00 late fees or 25% interest rates.
At the end of the plan you are now successfully caught up on any and/or all of your secured debts, and any remaining unsecured debt is completely discharged by court order. You are once again back on your feet with a fresh start.
Call me now at 817- 738-1633 for a free consultation. I am a debt relief agent. I help people file for bankruptcy.