What can I accomplish with a Chapter 13 bankruptcy filing?
A chapter 13 requires monthly trustee payments. The payments must be made for at least 36 months and no more than 60 months. The amount of the payments must be no less than the debtor’s monthly disposable income.
Why would a person file a chapter 13 and not a chapter 7?
If a person does not meet the criteria for a chapter 7 and has too much monthly disposable income, he must pay back a portion of the debt. Also, an individual may wish to save a house or auto from repossession / foreclosure, which requires a monthly payment to a trustee. Additionally, a person may wish to pay a creditor through a chapter 13 plan, that is not dischargeable in a chapter 7. Furthermore, there is certain debt that may be dischargeable in a chapter 13 that is not dischargeable in a chapter 7, such as certain type of marital debt. Similar to a chapter 7, immediately upon the filing, no creditor may pursue the debtor for the collection of any debt.
A chapter 7 does not prevent repossession of an auto or foreclosure of a house if the person is behind with their monthly payments. A chapter 13 can prevent a repossession and a foreclosure action, by paying back the payment arrears, through the monthly trustee payments, while continuing to make regular monthly payments on the auto and/or house. When the chapter 13 is completed, the pre filing arrears should be cured and the property is no longer in danger of loss.
Also, in New Jersey, a chapter 13 bankruptcy can permanently strip away a second mortgage from the debtor’s house. This is called avoiding the lien. A debtor can avoid the second mortgage if the present market value of the house is less than the mortgage payoff of the first mortgage. A New Jersey chapter 7 case does not permit second mortgage lien avoidance.
Based on various factors, a person may be able to pay their entire auto balance, plus a fair rate of interest, through a bankruptcy plan. This can reduce your monthly auto payment by lengthening the years of the financing. Also, under certain circumstances a person can keep their auto by paying the value of the auto, plus a fair rate of interest, through the plan. This will allow a person to keep the auto and reduce the amount that is paid.
In addition to the above, a person may be able to eliminate all or a portion of their unsecured debt (ie. credit card debt), depending on their monthly disposable income and asset values.
The Law Offices of Robert Manchel limits their practice to bankruptcy law. Please contact New Jersey bankruptcy attorney Robert Manchel at 1 (866) 503-5655, for questions and more bankruptcy information.