Chapter 13 Bankruptcy
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Chapter 13 Attorney
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.
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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.
The consultation is generally 15-30 minutes, however, a complex matter may take more time.
The consultation is free of charge and you are under no obligation to hire our law firm.
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.
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 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.
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What is the Process in a Chapter 13 Bankruptcy Case?
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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Chapter 13 FAQS
Can I Purchase a Home While in Chapter 13 Bankruptcy?
Most of the people who file for Chapter 13 bankruptcy are trying to save a home they already have. But in some cases, people who are working their way through a Chapter 13 plan start considering a home purchase.
And if you’re one of them, take heart: it is 100% possible to get a mortgage while you work your way through your plan. You just have to find a bankruptcy-friendly lender and meet their requirements. This won’t be easy, but other borrowers have made it happen, and if you’re careful and strategic, you can too.
There are some general requirements almost all these lenders have.
Make all payments on time. The lender will be looking for signs that your fresh start is helping to put you on the way to a brighter financial future.
Lenders want you to be successful with your new mortgage. Keeping up with your Chapter 13 bankruptcy payments is a good sign you can be.
Lenders will consider you to be the highest of high-risk borrowers. This means zero-down government-backed loans won’t be open to you.
Plan on saving at least 20% down. You should also be aware that the source of the funds matters. Many mortgage lenders won’t accept down payments that come from friend and family member gifts, for example.
If you’ve been a renter all your life you might not realize just how expensive homeownership can become. Even if you’re extremely handy, there are things you’re just not going to be able to fix on your own, or cheaply.
Your utility bills are likely to increase. In addition, you’ll have property taxes to deal with.
With a good attorney by your side, you should be able to work a modest emergency fund savings plan into your bankruptcy budget. But keep in mind the court won’t let you keep much.
Still, if you can show your lender you’ve got a cushion then they’re typically going to be more comfortable working with you.
When you’re working a Chapter 13 bankruptcy your financial decisions aren’t entirely your own to make. You’ll have to make your case to your trustee, who will approve or deny your decision.
You’ll need to demonstrate that taking out this mortgage won’t cause you to default on your payment plan, since the trustee’s primary concern is ensuring that the creditors don’t suffer harm or loss as a result of this decision.
For some borrowers, it’s truly better to wait. Some may even want to convert to a Chapter 7, clear the remaining debt (if they meet the requirements of the federal means test) and then save up while rebuilding credit over the next two years.
It’s not easy to meet the requirements while working on a plan. But much depends on your situation, your local housing market, and what you’re trying to accomplish. In some areas of the country, homeownership is significantly cheaper than renting, for example.
If you’re not sure what to do, consult your bankruptcy attorney. We can help you strategize and gain trustee approval if you decide to move forward.
Can I Buy a Car During Chapter 13?
It’s almost impossible to live and work without a car. And unlike houses, cars tend to break down at the worst possible moment. They wear out and they become more expensive to fix than to replace.
If this happens during Chapter 13 bankruptcy, will you be able to get a new one?
As it happens, the answer is yes. But it’s a multi-step process.
While it isn’t easy on a Chapter 13 budget, having a down payment ready can help. Bankruptcy-friendly car loan companies can be a godsend, but they aren’t being reasonable out of kindness.
They’re out to make money, and they can make a lot of money by charging a subprime borrower higher interest rates. Having a down payment can either reduce those interest rates a little or reduce your monthly payment and the terms of your loan.
You won’t have much of a line item for “savings” on your Chapter 13-approved budget, so you might have to get creative. For example, if you have a $1000 grocery budget you can use coupons, bulk buying, and cheaper recipes to try to bring it down to $700 a month. The trustee won’t suddenly demand that you use the extra $300 to pay more on your debt, which means you will be welcome to set it aside.
Your request won’t be particularly surprising. You won’t be the first person who has ever asked, and you won’t be the last.
But you’ll still be taking on new debt, and the trustee has to approve that. He or she will want to make sure your existing creditors won’t be harmed by your decision, i.e., that you will be able to keep making your plan payments. Obviously, you’ll have to keep up with your Chapter 13 bankruptcy payments even before you go shopping for a car. If you’re consistently late or struggling then it’s unlikely the trustee will say yes.
The trustee might also place limits on how high your car payment can be, which can put some limitations on the type of car you can buy. But the limits will be realistic: the trustee also recognizes it’s hard to make your payments if you can’t get to work.
You won’t be able to deal with vague numbers when you approach the trustee. You’ll need to have the dealership write up a financing deal without pulling the trigger on it.
It should list the make, model, and year of the car, and it should include all the loan details. This will all be included when you have your attorney file your “Motion to Incur Debt in Chapter 13.”
Once you have a court order, you can go back to the dealership and finish the process.
Keep in mind the car won’t be protected by the automatic stay. You’ll need to make every payment on time. If there are viable alternatives like public transportation, carpooling, or even putting together the cash to buy a very cheap car on Craigslist, then you should consider those before incurring another debt.
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