Chapter 13 Bankruptcy PA
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Chapter 13 Lawyer in Philadelphia
Chapter 13 Bankruptcy is a repayment plan and is commonly used to stop foreclosure or lower overall monthly expenses.
A Chapter 13 Plan is filed with the court and later confirmed allowing the Petitioner to repay mortgage arrears or only cents on the dollar of their unsecured debts (credit cards, medical bills, personal loans, collection accounts, and certain tax obligations, among others).
A Petitioner usually qualifies for Chapter 13 Bankruptcy protection based on the equity in real estate (house) or based on higher income qualifications, as discussed below.
Schedule a Consultation Now with a Philadelphia Bankruptcy Attorney
Who will I be meeting with?
You will be meeting with an experienced and trusted debt relief lawyer via phone, zoom or in-person who is licensed to practice in Pennsylvania and New Jersey. If schedules allow, most people speak with our firm’s founding Partner, Brad J. Sadek.
How long is the consultation?
The consultation is generally 15-30 minutes, however, a complex matter may take more time.
How much does the consultation cost?
The consultation is free of charge and you are under no obligation to hire our law firm.
How much do legal services cost?
Until we are made aware of your individual circumstances it is not possible to give a legal fee or legal strategy. You will be given a specific legal fee tailored to your situation at the consultation. Please note, our retainer (deposit to hire Sadek Bankruptcy Law Offices) can be as low as $200.00.
Do you offer a payment plan?
We offer each client a payment plan to make legal services most affordable.
Chapter 13 Bankruptcy in Philadelphia Case
– Scenario 1 –
Many people believe incorrectly that filing for Chapter 13 bankruptcy is their only option if they own a home. In fact, homeowners have several options when declaring bankruptcy.
Individual homeowners are entitled to an exemption of $20,200. To clarify, if two homeowners own property and have a mortgage of $100,000, the property must be worth over $140,400 for them to file under Chapter 13.
Otherwise, a Chapter 7 bankruptcy case may be a more viable option. The Chapter 13 bankruptcy attorneys at Sadek Bankruptcy Law Offices conduct free online appraisals to conclude whether or not Chapter 13 is the best option for you.
Chapter 13 Bankruptcy in Philadelphia Case
– Scenario 2 –
Income can also be a major factor in determining whether or not a Petitioner can file for Chapter 13 bankruptcy. Chapter 13 payment plans can be structured around what a Petitioner can afford to pay their creditors monthly rather than what he/she owes.
The Chapter 13 standards, called “means testing,” are similar to the IRS collection standards and often provide Petitioners with significant monthly savings on their debts. Because of these savings, Petitioners can enjoy a higher level of disposable income.
Chapter 13 Bankruptcy also leads to a higher credit score due to an improved debt-to-income ratio, leaving you and your family with better credit terms.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” is a legal process in the United States under the federal bankruptcy code that allows individuals with regular income to develop a plan to repay all or part of their debts over a period of three to five years.
Chapter 13 allows debtors to keep their property and catch up on missed payments through a structured repayment plan approved by the court. This form of bankruptcy is often chosen by individuals who have a steady income but are struggling to manage overwhelming debt, particularly mortgage arrears or tax debts, and want to avoid foreclosure or repossession of assets. It’s important to work with an experienced bankruptcy attorney for your Chapter 13 case.
Secured Debts vs Unsecured Debts in Chapter 13
In Chapter 13 bankruptcy, secured debts, such as mortgages and secured loans, are restructured through a repayment plan, allowing debtors to catch up on missed payments and retain possession of their assets. Unsecured debt may be partially repaid based on disposable income, with remaining balances potentially discharged at the plan’s end, providing a structured path to debt relief and a fresh start. Unsecured creditors may receive partial repayment, but generally not full repayment.
How to File Bankruptcy Chapter 13
As you might imagine, a Chapter 13 case is far more complex than a Chapter 7 case. It’s the type of case no borrower gets through without a lawyer.
There are, for example, a lot more places, reasons, and ways for creditors to make objections when you file a Chapter 13 case. There is a lot more paperwork and there are a lot more steps.
Here’s what to expect.
#1
Initial Consultation
After meeting with and retaining your Chapter 13 attorney, it will be time to sit down and gather all your financial documents.
During this free consultation, we’ll be working to make sure we don’t miss anything about your financial situation.
Once we’ve made sure everything is in order, and that there are no problems that could threaten your ability to get a discharge, it’s time to file.
#2
Filing & Automatic Stay
The automatic stay goes into effect as soon as you file your case, though it might take your creditors a little while to get their notice.
Once you have a case number, though, you can simply report the case number, along with the name and number of your Chapter 13 bankruptcy attorney, to any creditor who calls or tries to take action against you.
They’ll each receive formal letters notifying them of the stay, but keep your case number handy.
#3
Proposed Repayment Plan
You will have to make payments on your plan before there is a formal 341 hearing thanks to the way federal deadlines are structured.
Just keep in mind the payment your Chapter 13 bankruptcy lawyer proposes, and the first one you make, may not be the payment the trustee ultimately accepts.
#4
341 Meeting
The 341 Meeting of Creditors gives representatives from all of your creditor companies the chance to ask you questions while you’re under oath.
Often, they don’t even attend, but you shouldn’t count on that. The trustee will be able to ask you questions as well. He or she will mostly be trying to determine if the schedule is true, complete, and correct.
Assuming you’ve included everything and are making no attempt to defraud the court, this entire process should go off without a hitch.
#5
Plan Approval
At this point, the trustee and the creditors must approve or object to your payment plan.
This is the first point in the case where you will really need the help of a Chapter 13 bankruptcy attorney.
This is part of the case where people start filing objections and motions, where points of law and procedural issues enter the debate.
#6
Financial Education
You’ll need to complete the financial education course that’s required by law. You cannot get your discharge until you’ve completed this course and have filed the resulting certificate with the bankruptcy court.
Typically you can take the class online. Your Chapter 13 bankruptcy lawyer can point you in the right direction.
#7
Plan Payments
This is the longest part of the bankruptcy. For the next three to five years you’ll make the payments to the trustee.
The trustee will then distribute the money, starting with debts that can’t be discharged, moving on to secured debts, and then finishing off with unsecured, lower-priority debts.
#8
Completed Plan
When you’ve made the final payment the trustee will send you a Notice of Completed Plan Payments.
The court will review all the facts of the case and will make sure there aren’t any facts that might disqualify you from receiving your discharge.
In most cases, the court will issue a Notice of Intent to Enter Discharge. All interested parties will have 14 days to object if they have any objections.
Usually, though not always, any objections have long been met and dealt with by now.
#9
Follow-up
Your attorneys will usually have to nudge creditors to take certain necessary actions at this point.
For example, if you were behind on your mortgage when you went into your Chapter 13 plan then your attorney might have to make sure the mortgage company provides you with a written acknowledgment that your plan is now current.
All of these actions will pertain to secured debts. Unsecured debts have already been 100% dealt with.
#10
Final Decree
Once all the lingering issues of the case have been cleared up the court will issue a final decree, closing the case.
You get to breathe a sigh of relief, knowing you’ve achieved your fresh start.
Chapter 13 FAQS
Can I Purchase a Home While in Chapter 13 Bankruptcy?
Filing for Chapter 13 bankruptcy often aims to save homes, but some consider purchasing one during the process. Securing a mortgage while in Chapter 13 is feasible but challenging. Essential steps include:
- Demonstrate Financial Stability: Maintain timely Chapter 13 payments for at least a year to show progress toward financial recovery.
- Save for a Down Payment: Expect to save around 20% down, as high-risk status disqualifies from zero-down loans. Ensure the source of funds aligns with lender criteria.
- Build an Emergency Fund: Prepare for homeownership costs like repairs, utilities, and taxes. Incorporate a modest savings plan into your bankruptcy budget to reassure lenders.
- Seek Trustee Approval: Obtain permission from your trustee, demonstrating that a mortgage won’t impede Chapter 13 payments or harm creditors.
- Reevaluate Your Decision: Consider waiting or switching to Chapter 7 if it better suits your circumstances. Consult a bankruptcy attorney for guidance tailored to your situation and local housing market dynamics.
Can I Buy a Car During Chapter 13?
Living and working without a car is nearly impossible, especially considering their tendency to break down at inconvenient times and become costlier to repair than replace. If facing Chapter 13 bankruptcy, acquiring a new car is indeed possible, though it involves several steps.
Firstly, assembling a down payment is crucial. While challenging on a Chapter 13 budget, having a down payment can mitigate the higher interest rates charged by bankruptcy-friendly car loan companies, potentially reducing monthly payments and loan terms.
Approval from the trustee overseeing the bankruptcy is necessary. Although not unexpected, this request entails taking on new debt, necessitating assurance that existing creditors won’t suffer, and ongoing bankruptcy payments will continue uninterrupted.
Gathering evidence is essential for the trustee’s assessment. This includes obtaining a financing deal from the dealership detailing the car’s specifics and loan terms, to be submitted with a “Motion to Incur Debt in Chapter 13” filed by one’s attorney.
Upon court approval, finalizing the purchase at the dealership becomes viable. However, unlike other debts, the car won’t be protected by the automatic stay, mandating timely payments to avoid repercussions.
Exploring alternative transportation options such as public transit, carpooling, or purchasing a very cheap car should be considered before incurring additional debt.
Does the Chapter 13 Trustee Monitor Income?
Yes, the Chapter 13 bankruptcy trustee monitors the debtor’s income throughout the bankruptcy process. This includes reviewing the debtor’s financial documents, such as pay stubs and tax returns, to ensure compliance with the repayment plan and to verify that the debtor’s income is accurately reported. Any significant changes in income may require adjustments to the repayment plan, and the trustee may also investigate any discrepancies or issues that arise regarding the debtor’s income during the bankruptcy proceedings.
Will I Lose My House If I File Chapter 13?
In Chapter 13 bankruptcy, you typically won’t lose your house as long as you adhere to the court-approved repayment plan, which allows you to catch up on missed mortgage payments over time. This process enables you to keep your home while restructuring other debts in the bankruptcy estate. However, failure to maintain payments under the plan could result in foreclosure proceedings. It’s essential to work closely with your bankruptcy attorney to develop a feasible repayment strategy and protect your home throughout the bankruptcy process.
Can I Keep My Car If I File Chapter 13?
Yes, you can generally keep your car if you file for Chapter 13 bankruptcy. Chapter 13 allows you to restructure your debts, including car loans, through a court-approved repayment plan. As long as you continue making payments according to the plan, you can retain possession of your vehicle.
How Long Does Chapter 13 Stay on Your Credit Report?
Chapter 13 bankruptcy typically remains on your credit report for seven years from the date of filing. This period starts from the date of the bankruptcy petition, not the date the court approves the repayment plan or discharge.
What Happens to Debt When You File Chapter 13?
When you file for Chapter 13 bankruptcy, your debts are reorganized and managed through a court-approved repayment plan. This plan typically lasts three to five years and allows you to consolidate and prioritize your debts based on your income and expenses. Secured debts, such as mortgages or car loans, are usually included in the plan, enabling you to catch up on missed payments while keeping your assets.
Unsecured debts, like credit card debt or medical bills, may be partially repaid depending on your disposable income, with any remaining balances potentially discharged at the end of the plan. Certain debts, such as alimony and child support payments, are generally not dischargeable through bankruptcy.
Is Chapter 13 Worth It?
For those struggling with overwhelming debt but wanting to keep their assets, such as a home or car, Chapter 13 can be a valuable option. It provides an opportunity to restructure such debts through a court-approved repayment plan, potentially reducing payments and preventing foreclosure or repossession. Additionally, Chapter 13 can halt creditor harassment and give you time to catch up on missed payments while retaining control over your assets.
You may feel hesitant to initiate a Chapter 13 case because of the filing fee, but this is a small price to pay for financial stability. Additionally, you may qualify for a fee waiver in certain circumstances.
More on Chapter 13 Bankruptcy
- What is the Process in a Chapter 13 Bankruptcy Case? [no link]
- Can I Convert My Bankruptcy to a Different Chapter?
- What is the Bankruptcy Means Test?
- Why You Must Understand the Difference Between Chapter 7 and Chapter 13
- Chapter 13 Bankruptcy Offers Tax Deductions for Filers in Pennsylvania
- What is the Process in a Chapter 13 Bankruptcy Case? [no link]
- What You Need to Know About Car Repossessions in Pennsylvania
- Will Declaring Bankruptcy Give the Court Access to My Bank Account?
Work with Our Dedicated and Experienced Bankruptcy Lawyers
Sadek Bankruptcy Law Offices, LLC has a dedicated team of lawyers who help clients achieve the benefits of bankruptcy in Pennsylvania and New Jersey. Our lawyers have over 75 years of combined experience and have filed more than 5,000 successful bankruptcy cases.