Posted: March 24, 2020
You need relief from the pressure of your insurmountable debt load. You are employed and have a regular income, but you are several months behind in making your mortgage payments. Your home has substantial equity. You want to protect it from foreclosure, and you do not want to sell it. You are unsure as to whether bankruptcy is an appropriate option and, if so, what type of petition you should file. While all of your financial circumstances must be considered before making that decision, filing a petition under Chapter 13 of the Bankruptcy Code may be just what you need. Chapter 13 is specifically designed for an individual with regular income, unsecured debt of less than $394,725.00, and secured debt of less than $1,184,200.00. It also permits a debtor to retain his/her property during the bankruptcy process. In Chapter 13, a debtor proposes a plan to repay all or part of his/her debts over a period of three to five years. Debts are classified as secured, priority or general unsecured. The proposed plan will treat each creditor’s claim based upon its classification. For example, a priority claim will have to be paid in full, while a general unsecured claim does not have to be. Ultimately, the proposed plan must be confirmed by the Bankruptcy Court. This can only happen after proper notice of the proposed plan is given (to the Chapter 13 Trustee appointed to administer your case, to all of your creditors and to any other parties in interest), and a hearing on confirmation is held before the bankruptcy court judge, at which time any objections to the proposed plan will be heard. If the plan is confirmed, a debtor has the obligation of making the confirmed plan payments to the Chapter 13 trustee for the life of the plan. The trustee will then distribute the plan payments pursuant to the confirmed plan. While making the plan payments, the debtor must also remain current with all post-petition financial obligations as they become due.
Upon the filing of the bankruptcy petition and continuing throughout the life of the plan, there is an automatic stay in place which prevents creditors from commencing or continuing any collection efforts against the debtor. There is also an additional stay provision under Chapter 13 that protects co-debtors; specifically, it prohibits creditors from seeking to collect a “consumer debt” (as defined in the Bankruptcy Code) from any individual who is liable along with the debtor for payment of that debt. A creditor can seek a bankruptcy court order vacating the stay in the event the debtor is not making proposed plan payments, confirmed plan payments, or staying current with payments being made outside the plan (such as current mortgage payments).
Subject to certain specified conditions, a Chapter 13 debtor will receive a discharge upon completing all payments under his/her plan. The discharge will release the debtor from liability for payment of all debts provided for under the plan and from payment of any claims disallowed by the bankruptcy court. The discharge in Chapter 13 may also include debts which are non-dischargeable under other chapters of the Bankruptcy Code, such as non-dischargeable tax obligations and debts arising from property settlements in matrimonial proceedings.
If you believe that Chapter 13 may be right for you, it would be prudent to consult with experienced bankruptcy counsel to review your financial circumstances, consider all of your options, and decide what action would be in your best interest.
For assistance with all Bankruptcy matters, please contact us:
Ken Kirschenbaum, Esq. (516)-747-6700 Ext. 301 or firstname.lastname@example.org
Stacy Spector, Esq. (516)-747-6700 Ext. 304 or email@example.com