Kansas City Chapter 13 Lawyers for Bankruptcy Repayment Plans
Chapter 13 bankruptcy is also called a wage earners plan or an individual debt restructuring. It can stop foreclosure sales and allow people the time they need to cure debts. This can include past due mortgage payments. Chapter 13 allows people to develop a payment plan overseen by the bankruptcy court. The plan allows you to become current on a house and car while discharging other debts. Below is information explaining the Chapter 13 bankruptcy process, the advantages of it, eligibility for it, automatic stays, trustees, Chapter 13 plans, what to do with disposable income, how to make the plan work and about gaining a discharge.
Our Kansas City bankruptcy attorneys have provided the following information about filing Chapter 13 for your convenience. At The Sader Law Firm, we do not deal with other, non-related legal matters such as injury claims or traffic tickets. We are a bankruptcy firm. We focus on getting the debt relief our clients need when they need it most.
Filing for Chapter 13 Bankruptcy
A Chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, then the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, then the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.
What are the Advantages of Chapter 13?
Chapter 13 offers individuals a number of advantages over Chapter 7 bankruptcy. Perhaps most significantly, this chapter offers individuals an opportunity to save their homes from foreclosure. By filing under Chapter 13, individuals can stop foreclosure proceedings. They can then cure delinquent mortgage payments over time. Nevertheless, individuals must make all mortgage payments that come due during the Chapter 13 case on time.
Another advantage of Chapter 13 is that it allows individuals to reschedule secured debts (other than a first mortgage for their primary residence and certain vehicle loans). They can then extend them over the life of the Chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers.
Finally, Chapter 13 acts like a consolidation loan. Under it, the individual makes the plan payments to a Chapter 13 Trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under Chapter 13 protection.
In addition, a debtor may be able to strip (or remove) a second mortgage if the balance due on the first mortgage is equal to or greater than the home’s value. If the court grants this request, then the debtor will not have to pay the second mortgage as long as the debtor completes the Chapter 13 plan.
Can Chapter 13 Stop Foreclosure?
Individuals may use a Chapter 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the Chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. The debtor may lose the home if he/she fails to make regular mortgage payments due after the Chapter 13 filing.
How Long is the Chapter 13 Automatic Stay?
Filing the petition under Chapter 13 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. Filing the petition does not, however, stay certain types of actions listed under 11 U.S.C. § 362(b). The stay may also be effective for only a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments or contact you by telephone or send letters demanding payments in accordance with creditor harassment laws. The bankruptcy clerk gives notice of the case to all creditors whose names and addresses are provided by the debtor.
Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” from any individual who is liable along with the debtor. An individual incurs consumer debts primarily for a personal, family or household purpose.
Who Can File Chapter 13?
Any individual, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as the individual’s unsecured debts are less than $394,725 and secured debts are less than $1,184,200. These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a Chapter 13 debtor.
An individual cannot file under Chapter 13 or any other chapter if, during the preceding 180 days:
- A prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court.
- The petition was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon in which they hold liens.
No individual may be a debtor under Chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. There are limited exceptions in emergency situations. If you are facing an urgent financial situation, then speak with an attorney about emergency bankruptcy filings.
A Chapter 13 case begins by filing a petition with the bankruptcy court. Unless the court orders otherwise, the debtor must also file the same documents required in a Chapter 7 bankruptcy. As discussed below, the debtor must also file a Chapter 13 Plan.
How to Get a Chapter 13 Discharge
The bankruptcy law regarding the scope of the Chapter 13 discharge is complex and can change from time to time. A Chapter 13 debtor can have a discharge upon completion of all payments under the Chapter 13 plan so long as the debtor:
- Certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid.
- Has not received a discharge in a prior case filed within a certain time frame (two years for prior Chapter 13 cases and four years for prior Chapter 7, 11 and 12 cases).
- Has completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for the debtor’s district has determined that such courses are available to the debtor).
The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the Chapter 13 Plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.
Find a Kansas City Chapter 13 Attorney
If you would like to know what it feels like to be rid of your credit card bills, medical bills, signature loans and foreclosure threats, then we can help. Please contact Bradley D. McCormack by email or phone at (816) 561-1818. Call our law firm to set up a free phone consultation today.