SAN DIEGO – CHAPTER 13 BANKRUPTCY – REPAYMENT PLAN
STOP FORECLOSURE/REPOSSESSION OF FINANCED PROPERTY
If you fell behind on mortgage or car payments, have attempted to negotiate with lender such as through a loan modification process or offer of settlement but have been unsuccessful and want to do whatever you can to keep your home or car but lack the funds to bring your loans current immediately Chapter 13 can be a solution.
SOME DEBTS DISCHARGEABLE ONLY UNDER CHAPTER 13
Some debts although non-dischargeable under Chapter 7 can be discharged under Chapter 13.
STOP BANK LEVY/WAGE GARNISHMENTS ON NON-DISCHARGEABLE DEBT
Individuals owing significant non-dischargeable income tax debt who have been unsuccessful in negotiating with the tax authorities to establish a reasonable repayment plan or through an “Offer and Compromise” Chapter 13 can force tax authorities to accept payment plan as dictated by the Chapter 13 Plan.
KEEPING NON-EXEMPT ASSETS
Individuals having property that is not exempt (does not fit into any exemptions provided by law) can keep such property provided they repay the value of that non-exempt property through the Chapter 13 Plan.
HOW DOES CHAPTER 13 WORK
Unlike Chapter 7, debtor(s) propose a repayment plan and makes monthly payments to the Trustee who in turn pay the creditors. Payments are made every month for a period of either 3 or 5 years. The length of the plan depends on household income.
CHAPTER 13 TRUSTEE(S) COVERING THE SOUTHERN DISTRICT OF CALIFORNIA
- Thomas H. Billingslea, Jr., 530 “B” Street, Suite 1500, San Diego, CA 92101-4499 E-mail: email@example.com, Phone: (619)233-7525, Fax: (619)233-7267
- David L. Skelton 525 B. Street, Suite 1430 San Diego, CA 92101 E-mail: firstname.lastname@example.org Phone: (619)338-4006 Fax: (619)239-5242
Because of the nature a repayment plan in the Chapter 13, it is possible to put any “arrearages” (past due amounts) on mortgages and car loans into the Plan and stop foreclosure and repossession. The Plan, allows debtor(s) to catch up.
First Question: How Much Must I Pay?
The challenge here is often whether the debtor’s household income and expenses (The Budget) allow the debtor(s) to be in a position to afford to make regular monthly payments. Obviously, the longer the distressed homeowner waits and further behind he/she gets on loan(s) the larger the payment would need to be. The Plan cannot exceed 5 years so overdue amounts must fit into the 60 month’s worth of payments. A lot of work and discussion can go into figuring out the plan and whether the household’s budget can allow debtor to make the required payments.
Besides arrearages, Payment Plan also depends on several other factors such as the household’s disposable income and the amount of debt. Disposable income here does not necessarily mean what you have left after paying bills. Bankruptcy laws have specific guidelines about what can and is a deductible legitimate expense that can be deducted from the household’s gross income. These numbers, some published by Census Bureau, play an important role in calculating the payment.
Just as in the Means Test discussed under Chapter 7, we first calculate the average gross income for past six months. From this amount we MINUS “allowable expenses”.
Typically, an Attorney will need information and time to run the calculations to analyze your situation and discuss results. Household size, basic living expenses, debts, and assets can all be factors here. The resulting Disposable Income is what must be paid to the unsecured creditors (which could include credit card debt, medical bills, and lien stripped second mortgages).
The Plan will also include payment of Secured Debt for any property that debtor wishes to retain (For example: arrearages and current payments on vehicles debtor wants to keep or arrearages on mortgages. Regular mortgage payments are made directly to the lender, which of course means they must also be affordable. The Plan must bring current all Unsecured Priority Debt, like income taxes. The larger the overdue income tax obligations or child support, the larger the plan payment.
Chapter 13 can help make the home affordable by transforming second and third mortgages into unsecured debt. These creditors would be paid same percentage as all unsecured creditors in the bankruptcy case.A lien strip can only be done on a primary residence. The value of the residence must be below the total amount owed on the first mortgage.
Bankruptcy laws allows the Bankruptcy Court to strip off the second and third mortgages and categorize them as unsecured. Unsecured creditors have the lowest priority in bankruptcy.