What Chapter 13 Can Do For You:
Chapter 13 protects you from creditors while you prepare a plan to modify your debts. Chapter 13 can be used by a husband and wife jointly.
You can stop foreclosure and take from three to five years to catch up on past-due mortgage payments. For Example, suppose you are behind four payments of $500 each on your mortgage, for a total of $2,000. You can include the $2,000 in your plan and pay it over a period of one, two, three or perhaps five years. (Of course, you must continue making the regular $500 monthly payments on the mortgage as they come due while you are “curing” the default under the plan.
Car repossessions can be avoided. If you are behind on installment payments on your motor vehicle–or on any other installment purchase contract other than real-estate–the entire debt can be readjusted under the Chapter 13 plan.
Stops Garnishments; stops repossessions; stops creditors’ phone calls. Upon filing of a Chapter 13 case in the United States Bankruptcy Court, an automatic “stay order” takes effect, and stops all creditors’ activities including foreclosure, re-possession, seizure of any assets, garnishments, and creditor contacts such as phone calls and demand letters.
Income Taxes and other taxes that are past due can be spread over a three to five year plan.
All Debts: In short, you can take all your debts, including taxes, mortgage arrearages, medical bills, loans, child support, charge accounts, bank card charges, even debts that may have been incurred through misrepresentation, and even government-insured student loans, and make one payment each month to a court-appointed trustee who pays all creditors according to your “plan.” Generally, you can pay as little as necessary to make the debt manageable.
Co-Signer Protection: Chapters 12 and 13 offer protection to your co-signer on non-business kinds of debt (“consumer” debt). The law enables you to pay your co-signed debts in full, even though you might not pay the full amount to your other creditors.
Chapter 13 is used primarily by individuals who are not in business, but it can also be used by any business, large or small, as long as it is a sole proprietorship. (It cannot be used by a corporation). There is no requirement of insolvency, even a healthy business may avail itself of the protection of Chapter 13.
Protection: Certain legal powers are conferred upon the Bankruptcy Court to protect you from interference. There is in effect a restraining order against all of your creditors, including taxing authorities, to keep them from seizing property or suing you for payment. In addition, recent changes in the law now prevent employers from discriminating against you because you have filed for bankruptcy protection.
If You Own a Business: A business will generally prefer to file a Chapter 11 rather than a 13 case. Nevertheless, there are some situations when a Chapter 13 filing will be more advantageous for a business (This applies only to businesses owned by individuals. If incorporated, or if it is a partnership, it cannot be filed under Chapter 13). This means that a sole proprietorship or an individual doing business under an assumed business name, for example may file a Chapter 13 case, just as an individual who is not running a business may. The income requirement is that the person must be able to project “regular income” after the filing of bankruptcy. This is because the basis of the Chapter 13 debt payment plan is that there will be money coming in that can pay some of the indebtedness, albeit less than the full amount and stretched over years. Any projected payments must start within about 30 days. A man and wife file jointly. There are debt limitations in Chapter 13 cases as well. The maximum debt allowable is $250,000 in unsecured debt and $750,000 in secured debt. (Secured debt is the kind where the creditor has collateral such as real estate or a vehicle or appliance or equipment)
If there are co-signer problems, Chapter 13 is particularly helpful and can give protection to the co-signer who has not filed bankruptcy while the payments are being made under a Chapter 13 plan. (This applies to consumer debt only, not to business debts.)
If there are court judgments, they can be set aside, or paid less than 100 percent.
Tax claims can be paid, frequently without interest under Chapter 13. (Under a Chapter 11 plan, such installment tax payments will always carry interest.)
Chapter 13 usually requires that monthly in-stallment payments begin immediately. The pay-ments under a Chapter 13 plan can sometimes be other than monthly pay-ments, but they must be “regular” payments and the payments must begin within about thirty days.
Mortgage delinquencies can be spread out over a period up to three to five years, so that they are brought current by the end of the plan. (In Chapter 11, mortgage delinquencies must be either brought current at the time the plan is confirmed, or the entire mortgage rewritten.)
If considerable time is necessary for the sale of an asset such as real property or equipment, Chapter 11 or 12 is generally the better chapter to use, particularly is the individual is unable to begin immediate regular payments. If only a few months are needed to sell an asset, however, Chapter 13 may help.
Selling Real Estate Inventory, Equipment: The spirit and purpose of Chapter 7 is the quick sale of non-exempt assets, if any. Non-exempt assets are converted to cash, which is paid to creditors by the trustee. We will explain to you what assets are exempt when you visit with us.
Chapter 11 can also be very much like Chapter 7. The difference is that in a Chapter 11, a quick sale is not generally required. In other words, a Chapter 11 debtor can sell assets over an extended period of time, even years if needed, in order to get the best price. Compared to Chap-ter 7, this works to the advantage of tax creditors and unsecured creditors because they are more likely to get more money in this fashion than they would from a quick sale. (Chapter 11 does, however provide two alternatives: First is to rehabilitate a company, keeping it in business and thus paying creditors over an extended period of time; or second, to sell the assets of a business that is not going to continue, through a con-trolled liquidation. Of course, a rehabilitation or reorganization of a business may sometimes include the sale of only a part of its assets to help it to survive.
To summarize, there are many provisions of the Bankruptcy code which can be applied to your situation to remove the burden of debt you may find yourself under. To find out more about the help which is available to you, please call for a free consultation.