Filing a Chapter 13 Bankruptcy is known as a reorganization or repayment plan. Entering into a Chapter 13 Plan allows you to restructure your debt through a repayment plan. As a Tampa Chapter 13 bankruptcy attorney I can give you the opportunity to preserve assets, eliminate dischargeable debts, and obtain the flexibility to repay other debts though plan payments. You can often keep many of the assets that you want to keep such as your home and cars. If you have solid, dependable income but cannot service all your debts and have property you want to protect, Chapter 13 bankruptcy may be the best solution. Additionally, if you have multiple credit cards debts, a payment plan can be structured so there is a monthly repayment amount that will fit your budget and make it more manageable to pay other obligations such as a home mortgage, or non-dischargeable tax debts and arrears on student loans or child support. Another benefit is that you do not have to negotiate with the creditors. They have to abide by the repayment plan set up by the trustee. You are also allowed deductions for necessary expenses such health care, contributions to 401K or retirement accounts, rent or mortgage, vehicle and transportation expenses, childcare expenses, etc. which are calculated before its determined the amount left over in the plan to pay back your creditors.
There are several reasons why a person would choose a Chapter 13 bankruptcy as opposed to a Chapter 7 bankruptcy. First, you must meet income requirements to file for a Chapter 7. The eligibility requirements for a Chapter 7 include income ranges from $42,000-$65,000 depending on whether you are married, single or how many dependents you have. If you exceed the income requirements, then you would instead qualify for a Chapter 13 bankruptcy. Secondly, if you have assets you want to keep that exceed the allowable exemptions then Chapter 13 would be best for you. In Florida, there is homestead exemption. If you are using the homestead exemption, they you are allowed $1,000 for your personal property and $1,000 in equity in your vehicle. For example, if you had a boat worth $10,000 and a vehicle that was paid off and worth $10,000 you would owe the $18,000 to the Chapter 7 trustee. A Chapter 13 plan would allow you to keep all of your assets and pay the liquidation amount (amount for your non-exempt assets) over a period of five years. For example, if you have $6,000 of non-exempt assets, they you would need to pay back $6,000 to your unsecured creditors during the course of the Chapter 13 plan.
If you want to surrender your property and get rid of any type of deficiency judgment then Chapter 7 is perfect for you. If you are behind on your mortgage and want to keep your home, Chapter 13 is a great option when filing bankruptcy. As soon as the bankruptcy is filed the foreclosure immediately stops and cannot continue as long as you stay in the Chapter 13 plan. If you are behind on your mortgage or facing foreclosure Chapter 13 affords you two options to keep your home. You can elect to go through the mortgage modification process and pay 31% of your gross income into the Chapter 13 plan and mediate with the lender as part of the bankruptcy process. There is a much higher success rate for people who go through this process in the bankruptcy arena verses doing it on their own. While keeping that in mind, not everyone is a good candidate for mortgage modification. That is best discussed during the initial consultation to determine the likelihood of success for you. There is no guarantee that a lender will modify your loan but some people are better candidates than others. Alternatively, you can pay back your arrears during the course of the Chapter 13 plan. For example, if you are $15,000 delinquent in your mortgage payments, you can spread that amount over 60 months/5 years and the bank must allow that as long as your in the Chapter 13 plan.
The amount of the payment plan can vary significantly depending on your income, expenses, and assets. It is very unique to your situation. It can be less than $300 per month to several thousand dollars per month so its important that we discuss the formulas during the consultation to give you a range of what you can expect in your particular situation. Many people are surprised to learn how many options are available to them in bankruptcy and specifically in a Chapter 13 plan.
Other great benefits to filing a Chapter 13 bankruptcy are:
Car: You can redeem your car and pay only the fair market value instead the full value of the amount borrowed if you had your vehicle 910 days prior to filing bankruptcy. For example if you have an car loan for 10,000 on a vehicle now only worth 5,000 you can “cram down” the loan amount to 5,000 to make the payments more manageable.
Home: If you have a second mortgage or a home equity loan it can be “stripped” or eliminated if there is no longer equity in your home. This has saved clients of mine tens of thousands of dollars.
HOW DOES BANKRUPTCY AFFECT CAR REPOSSESSION?
Filing for bankruptcy can wipe out your obligation to pay the loan, but the lender can still retrieve the vehicle if you are not current on your payments. A Chapter 7 bankruptcy eliminates unsecured debts and may free up more of your income to pay for your vehicle. A Chapter 13 bankruptcy plan will assist you in avoiding the repossession of your car and allow you to continue making affordable monthly payments on the loan. You can redeem your car and pay only the fair market value instead the full value of the amount borrowed if you have had your vehicle 910 days prior to filing bankruptcy. For example if you have an car loan for $10,000 on a vehicle now only worth $5,000 you can “cram down” the loan amount to $5,000 to make the payments more manageable.
A huge advantage of filing for Chapter 13 Bankruptcy is that you may owe debt to creditors at the end of your bankruptcy which in many cases, will be erased and you will not need to repay it back.
If you are considering filing a Chapter 13 Bankruptcy contact me today for a free initial phone consultation at: 813-463-8000. Know your options in repaying debt to creditors through affordable monthly payments. Gina Rosato Law Firm, P.A. is your Tampa Chapter 13 Bankruptcy Attorney.