Articles Tagged with Why Chapter 13

At least twice a month I receive calls from homeowners who are in the middle of the modification process with their mortgage company and they get notice of a foreclosure.  Over and over they had been told the modification was still being reviewed.  In some cases they were told they’d been approved.  But all of a sudden they find their home is being advertised in the newspaper and a sale date is set at the courthouse. Mortgage companies review loans for modification and try to foreclosure at the same time.  This is known as “dual tracking”.  They don’t stop the foreclosure process when a mortgage is considered for a modification.  If you are in the modification process with your mortgage company you can never assume that it will be approved or they won’t foreclose.  The foreclosure process in Mississippi is quick, so you can’t trust anything they tell you over the phone.  If you become aware your home is in foreclosure, contact our office immediately.  We can stop the foreclosure sale through filing a Chapter 13 bankruptcy and you can still follow-up with a modification, if needed.  You never want to be in a position of trying to get your home back after the foreclosure.  Better to be safe than sorry and stop the foreclosure before it happens.

Possibly, but first you need to understand that a Chapter 13 plan is not based on your income.  It does not fluctuate depending upon how much you make.  The Chapter 13 plan amount depends upon what you plan on keeping and/or what creditors you plan on paying through the bankruptcy.  For example, if you are paying for only your home through your plan, the amount of the payments will be based upon the mortgage amount then that amount spread out over the life of the plan to catch up your back notes.  This amount won’t change unless your mortgage note happens to change.

However, if you are paying for several things – such as a student loan, a vehicle, a home, and a furniture note – through your Chapter 13 plan, the payments could become lower if you decide to stop paying toward the student loan or decide to surrender a vehicle, or the home, etc.

Since a Chapter 13 plan is dependent upon who you plan to pay and what you plan to keep – you can decide to change (with some exceptions) who you are paying and/or what you are keeping in order to lower the note.

Definition of StrategyAlthough there is not a limit on the number of bankruptcy cases you can file and no limit to the amount of time in between filings, there are limits to when you are eligible to receive a proper “discharge”.  So why would you want to file a bankruptcy case if you know you cannot receive a discharge?  There are several reasons why this strategy may be utilized.  For example, say that you recently filed a chapter 7 bankruptcy and wiped out your unsecured debt but you have student loan or tax debt that is non-dischargeable.  You could turn around and file a chapter 13 bankruptcy in order to be protected from garnishments, lawsuits, levies, etc relating to the student loans or tax debts for up to 5 yrs even though you would not receive a discharge.

Here are the time frames that must occur between filings for discharge eligibility (Note: the time is counted from date filed to date filed):

8 years between Chapter 7’s. -727(a)(8)

I get countless calls from people asking what they can do to about their parents or grandparents who co-signed for them on a student loan and are now facing garnishment, loss of their tax refunds, or even seizure of their bank accounts because they co-signed and the loans have not been paid.

This is a common tactic for debt collection on student loans.  If the student isn’t working – they will go right after anyone who co-signed for the loan.  And they have broad powers – there is no notice required – they can garnish, etc without warning unlike collection of normal debt where there must be a lawsuit filed and judgment obtained first, etc.

It’s pretty well known you cannot wipe out student loans through bankruptcy, but if you file a Chapter 13 bankruptcy, you can stop all action – against you AND against anyone that co-signed for your student loan.  Chapter 13 bankruptcy protects the debtor and co-debtor.  Both do not have to file – just one.  If the co-debtor files it protects the main debtor and vice versa.  For example – mother co-signed for son’s student loan.  Mother files Chapter 13 bankruptcy (maybe even for other reasons) – it protects the son regarding the student loan they both signed for.  Or son files Chapter 13 bankruptcy – it protects the mother.

drivers-license-&-id-bigThe “withholding, suspension, or restriction of a driver’s license, a professional or occupational license, or a recreational license, or the reporting of overdue support to a consumer reporting agency, or the interception of a tax refund” are actions that can be taken upon an individual as a penalty for failure to pay support.  These penalties are excepted from the Automatic Stay and can continue despite the initial filing for protection under bankruptcy. However, by filing a Chapter 13 bankruptcy the Chapter 13 plan will provide for payment of the past due amount as well as offer provision for the current and ongoing amount owed to ensure that the debt does not become delinquent at any time during the life of the Chapter 13 plan. Once the Chapter 13 plan is confirmed (you file, attend a 341 hearing approximately 30 days later, then the bankruptcy judge approves the plan approximately 30 days after that thus “confirming” the plan) with payment of the past due support provided in the plan, any continuing action of any of these penalties would be in violation of the confirmed plan and the creditor could be subject to sanctions if they continue any such actions against the debtor.  So bottom line is yes, a Chapter 13 bankruptcy could provide some relief regarding these types of penalties.

jailFiling Chapter 13 bankruptcy can be used to pay past due support over an extended period of time (max of 5 years within a single Chapter 13 plan) and yes, it can protect the debtor from going to jail for previously failing to pay what was due.  It’s important to note that you cannot discharge (wipe out) in any type of bankruptcy (Chapter 7, Chapter 11, Chapter 12, Chapter 13, etc) debts relating to child support, maintenance, alimony, and other domestic support obligations.  Not only will the Chapter 13 plan provide for catching up the past due amounts, but it will also provide for the current and ongoing payments in order to prevent the debtor from becoming behind in support during the Chapter 13 bankruptcy plan period.

First of all, discuss your situation with a competent and knowledgeable bankruptcy attorney, preferably one who only represents consumers.  Do it before you do anything thing else, before you pay any creditors or relatives, before you give any property away, before you let the house go, before you take on new credit or sell any of your property.

There are numerous differences between a Chapter 7 Bankruptcy and a Chapter 13 Bankruptcy in Mississippi and many reasons to choose one over the other.   Here is a list of reasons why a Mississippi Chapter 13 Bankruptcy might be the best option for you:

A Chapter 13 will save a house from foreclosure.