Chapter 13:

Do you need to stop a foreclosure, repay recent tax debt, and retain valuable assets?

For some clients, Chapter 7 is either unavailable or not appropriate.  For those clients, Chapter 13 bankruptcy offers an alternative for protection from creditors.  A Chapter 13 case enables clients to repay their debt in part or in full over up to five years by proposing a plan approved by the Bankruptcy Court.  A Chapter 13 case may be the best solution for our clients to: 1) catch up past-due mortgages and vehicle loans; 2) retain assets that would otherwise be taken by the Bankruptcy Court in a Chapter 7 case;  and 3)repay, in a controlled and orderly manner, debt that can’t otherwise be eliminated in a Chapter 7 case. 

Secured Debt Arrearages

Chapter 13 allows clients to catch up past-due mortgages and vehicle loans, and eliminate second mortgage debt through "lien stripping". This is done through a court approved Chapter 13 plan to repay the arrearage or the full amount of the loan over up to five years, while the ongoing continued to be paid directly.  The Rothbloom Law Firm works to analyze each client’s case to determine whether a Chapter 13 case is the best course of action for the client’s circumstances; then, we work to propose a plan payment that is affordable.

Protecting Assets

Clients who own real estate and personal property that they would otherwise lose in a Chapter 7 case can protect and retain those assets in a Chapter 13 case by paying an amount equal to the fair value of those “non-exempt” assets to the Chapter 13 trustee over time, satisfying what is commonly called the “liquidation test”.  An important part of proposing a Chapter 13 plan to help clients retain assets is to ensure that those assets are valued correctly, minimizing the amount debtors must pay to retain them.  We work to identify and properly value our clients’ assets so that they may fully protect them in their Chapter 13 cases in order to ensure that the Chapter 13 plan payment is fair.

Excess Income

Clients may also need to file a Chapter 13 bankruptcy case if their income is too high, based upon the “Means Test”, to qualify for a Chapter 7 case.  Under these circumstances, each month clients must pay their monthly “disposable income” (as determined by a set formula) in one payment to the Chapter 13 trustee for the benefit of their unsecured creditors.  The unsecured debt that remains unpaid after disposable income has been paid over five years is wiped out.  Our attorneys first strive to help our clients qualify for Chapter 7 relief.  When Chapter 7 is not an option, the goal is to propose a Chapter 13 plan that works for our clients and will ultimately be successful.

If you have questions or need assistance, call us today to speak with one of our lawyers by phone or in person.