WHAT YOU NEED TO KNOW ABOUT CHAPTER 13
A Chapter 13 Bankruptcy is designed to help people reorganize their debt. What this means, is that a person who files a Chapter 13 bankruptcy proposes a plan to the Court. This plan tells the Court and Creditors who are going to get paid, how much they are going to get paid, what assets are going to be kept, and what assets are going to be surrendered. You make a payment every month to a Court Appointed Trustee, and the trustee sends the money to where your plan says it should go. There are very specific rules about what a plan can and cannot do, which is why it is important to get an attorney who knows what the rules are.
A Chapter 13 Bankruptcy Can Help You Do the Following:
1. Save Your House. In a Chapter 13 bankruptcy, if you are behind on your house payments but you want to keep your house, you can save your home. In Nevada, you have two ways to save your house. You can propose a plan payment to the Trustee which will resume your normal monthly payments and include additional money to catch-up on your arrears. You can propose to repay the arrears over an up to a 5 year period of time, and your lender cannot foreclose on you while you are making payments. The second option is to use the Bankruptcy Courts Mortgage Modification Mediation Program, to try to negotiate a loan modification with your lender. So far, success rates in modification have been about 70%
2. Keep Your Car. If you are behind on car payments, a Chapter 13 can give you a chance to catch up. In some circumstances, you may even be able to extend the amount of time to pay off your car, so you can reduce payments. Often you can change or modify the interest rate to something more reasonable. And in some cases, you can even reduce what you owe on the car to the fair market value of the vehicle, and pay just what the car is worth, at a low-interest rate, over a 3-5 year period of time. This is true whether you owe money to a dealership, a bank, or have a car title loan. A Chapter 13 can help you keep your car if you are struggling with payments
3. Repay The IRS. Anyone who has ever owed the IRS money knows their collection efforts can be brutal. And with penalties and interest constantly running against any amount you owe, it can seem like you will never get them paid. In a Chapter 13 plan, you can stop the penalties and often the interest, you can often reduce the total amount you owe the IRS, and you can get them paid off in a 3-5 year period. There are various options for dealing with the IRS in a Chapter 13 Bankruptcy.
4. Consolidate And Reduce Debt. At Crosby & Fox, we understand how quickly credit card debt can become a quicksand trap. Missing a payment on one card can trigger universal default provisions on all of your credit cards. Interest rates increase, available balances decrease, it becomes harder to keep up on payments, which means more default and it continues to become harder and harder. In a Chapter 13 bankruptcy, you can consolidate all of your unsecured debt, including credit cards, medical bills, and personal loans. You can stop the interest from running. And you can propose to repay only what you can afford to repay. In most cases, that means you only have to repay a fraction of your debt, and in some cases, you may not have to pay anything to your unsecured debt.
There are many more things that you can do in a Chapter 13 case. You can deal with rental property, keep additional automobiles, eliminate second mortgages, and much more. Chapter 13 is more than just getting rid of debt, it is restructuring your finances so that you can move forward in your life to have a successful financial future.
There are limitations to a Chapter 13.