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Changes in Mortgage Payments in Chapter 13 Cases

February 15, 2010 By admin Leave a Comment


A Chapter 13 bankruptcy is also called a wage earner's plan. It 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, 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, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C.

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Chapter 13 Payments: Reorganizing Debt To Retain Property And Assets

February 13, 2010 By admin Leave a Comment

Chapter 13 payments are prearranged when bankruptcy is approved through the court. In most instances, a Trustee is assigned to oversee the debtor's case and will disperse payments to creditors until accounts are paid in full. Occasionally, chapter 13 payments can be made directly through payroll deductions.

Once debt reorganization has been approved, Chapter 13 payments are clearly outlined in the repayment plan and leave little room for deviation. Consistent payments must be made to repay creditors, tax liens and mortgage payments, if applicable.

In cases where the debtor holds a mortgage, Chapter 13 bankruptcy can stop the foreclosure process. However, if the debtor fails to make mortgage payments in a timely fashion, the lender can commence with foreclosure proceedings.

In instances where the debtor fails out of bankruptcy, the court may order the individual to liquidate their assets under Chapter 7 Bankruptcy. This action requires the debtor to relinquish their property to the Trustee who will sell the assets and repay creditors.

Chapter 13 bankruptcy is available to all U.S. citizens. This chapter of bankruptcy allows individuals to reorganize their debt so they can retain their property and assets. Payments are extended over a period of time, allowing the debtor to make smaller monthly payments. In some instances, creditors will reduce interest rates or agree to a lesser amount than is owed on the debt.

With Chapter 13 bankruptcy, certain eligibility requirements must be met. Unsecured debts must be less than $307,675 and secured debts must be less than $922,975. Prior to filing bankruptcy, the debtor must obtain credit counseling through an approved agency.

When the debtor files for chapter 13 relief, they must submit a certificate of credit counseling, debt repayment plan, proof of income and expenses, and copies of the most recent year tax return. A detailed list of debts owed to creditors must be included, along with proof of living expenses including food, shelter, utilities, taxes, transportation and healthcare expenses.

Arranging Chapter 13 payments will stop collection actions against the debtor. However, it does not eliminate debts. As long as payments are made in a timely fashion and disbursed by the Trustee or through payroll deductions, no further action will be taken against the debtor.

If circumstances arise which cause the debtor to be unable to make payments, the Trustee must be notified immediately. In instances where the problem is temporary, the Trustee can elect to reduce or temporarily suspend payments or extend the repayment period.

When the financial setback is determined to be long-term, the bankruptcy court may recommend modification of the plan, discharge the debts on the basis of hardship, dismiss the Chapter 13 case, or convert to Chapter 7 liquidation. If the debtor fails to notify the Trustee to modify their repayment plan, creditors can move forward with collection actions.

Chapter 13 Bankruptcy payments provide individuals with the opportunity to make a fresh start, yet retain their property and assets. When developing the repayment plan it is crucial to arrange affordable payments which the debtor can consistently make in a timely fashion. Otherwise, the effort will be futile; causing the debtor to fail out of bankruptcy and potentially lose their home, automobile and other valuable assets.

Simon Volkov is a private investor who specializes in helping individuals quickly liquidate their assets. Simon offers solutions to individuals facing foreclosure, probate and chapter 13 bankruptcy. Learn more by visiting www.SimonVolkov.com.

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Home Mortgage Payments in Chapter 13

February 8, 2010 By admin Leave a Comment

Most of the time chapter 7 is the best case scenario, however there's also chapter 13. Chapter 13 should be used when there's a lot of equity in a house or some other kind of asset that a debtor is trying to protect. An example of this can often be seen when a person comes in with a house that has a lot of equity in it. Well, a way to protect this is for the debtor to file a chapter 13. If there's more than $15,000 or in a joint case bankruptcy more than $30,000 of equity, then a trustee may actually go after your house. By filing chapter 13 bankruptcy, the foreclosure process stops and the trustee doesn't seize your house for the purpose of using the equity within it to pay of your creditors. However, once Chapter 13 is filed the secured debt, home mortgage has to be paid in full, you have to be able to make the original payments in full. The big benefit of filling chapter 13 is that it allows you to stretch your arrears payments that you missed for your home mortgage over the period of the payment plan.

Now, the good thing about that is the mortgage company can keep calling you and forcing you to make those late payments right before you file, but once you file those late payments are stretched out over three to five years and you have time to actually pay those out. So if you did get in a bad situation, something where you lost your work for a couple of months, got sick, other circumstances unforeseeable might have happened, the bank might being trying to foreclose on you. Now, your option is just to file a bankruptcy chapter 13 and all of the sudden you have three to five years to pay back the amount that you owe, and of course you've to keep making your mortgage payments.

In a chapter thirteen the debtor's unsecured debt is handled very differently than in chapter seven. Debtor has to pay a portion of unsecured debt. The debtor might be required to pay anywhere from ten to one hundred percent of the unsecured debt over a period of three to five years. A formula determines the actual percentage of unsecured debt that is going to be paid off and the period over which the amount is going to be paid. There are two basic formulas that determine how much is going to be paid out. One formula looks at how much equity you have in your property, how much equity you have in your property that is the amount that you have to pay. If you have $30,000 of equity in your house, and you're filing a chapter 13 you're going to have to actually pay back at least $30,000 to these creditors. The reasoning behind this formula is simple. If you have $30,000 in your house you have two options, it's either you're going to sell it and give creditors the money, or you keep the house but you the creditors $30,000 within that three to five years. Now, even if you don't have that much equity, there's another formula that can be looked at and that is your income over your expense.

David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs. Additional information is available at Bankruptcy Lawyers New York.

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Chapter 13 Payments and Personal Bankruptcy

February 8, 2010 By admin Leave a Comment

Chapter 13 payments are used when debt is restructured through bankruptcy. Debtors must abide by the repayment plan for two to five years. During the restructured debt period, debtors are prohibited from incurring new debt unless approved through the court.

Chapter 13 payments are usually paid to a bankruptcy Trustee and dispersed to creditors on a monthly basis. Occasionally, chapter 13 payment plans are setup through payroll deduction. Automatic payroll payments are usually reserved for debtors who have been employed with the same company for three or more years. Should the debtor quit or be terminated by the employer, bankruptcy payments will be revised through the court.

Many people turn to chapter 13 bankruptcy to avoid foreclosure. While filing personal bankruptcy can temporarily stop lenders from commencing with foreclosure action, if debtors do not adhere to their chapter 13 payments repayment plan, they will eventually lose their house.

One thing homeowners often fail to understand is they must be financially able to pay regular monthly home loan payments in addition to chapter 13 payments. Individuals struggling to make ends meet find that bankruptcy repayment plans create a heavier debt load which can cause them to fail out of bankruptcy.

When debtors fail out of bankruptcy, creditors are legally entitled to petition the court seeking bankruptcy dismissal. Depending on the circumstances, bankruptcy judges can elect to allow borrowers to file for Chapter 7 or dismiss the case.

Chapter 7 is referred to as 'liquidation bankruptcy' because debtors must liquidate assets to repay creditor debts. Debtors are not allowed to remain in their home and must sell the property or give the house back to the bank using deed in lieu of foreclosure.

Bankruptcy is a debt reduction option available to all U.S. citizens. However, certain eligibility requirements must be met. Chapter 13 eligibility requirements state debtors cannot owe more than $307,675 in unsecured debts or $922,975 in unsecured debts.

Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005. BAPCPA requires debtors to obtain credit counseling through a U.S. Trustee Program approved agency within 180 days of submitting bankruptcy petitions.

To determine the amount of debt to be repaid through chapter 13 payments, debtors must undergo the 'means' test; a financial tool that measures debtor's income against their states' median income. If debtor's earn as much or greater than median income, they are required to file chapter 13 bankruptcy. When debtors earn less, they might be allowed to file chapter 7.

Once bankruptcy petitions are filed, debtors are required to provide a credit counseling certificate, chapter 13 repayment plan, proof of income, detailed financial statement, and recent years' tax returns.

Chapter 13 provides debtors with the opportunity to restructure debt and regain control over finances. However, personal bankruptcy stays on credit reports for ten years; making it difficult to obtain credit of any kind.

Before making a final decision to obtain bankruptcy protection, take time to investigate bankruptcy alternatives such as budgeting, credit counseling, debt settlement or debt consolidation. Oftentimes, these debt reduction options help debtors achieve the same result without incurring substantial credit damage.

Simon Volkov is a real estate investor residing in southern California. He specializes in buying real estate from individuals facing foreclosure or bankruptcy. He has published hundreds of articles on topics such as personal money management, bankruptcy and chapter 13 payments via his website at www.SimonVolkov.com.

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A Chapter 13 Bankruptcy Reorganizes Debt, Stuctures Payments

February 7, 2010 By admin Leave a Comment

A Chapter 13 bankruptcy is the specific type of legal proceeding that is granted under Federal statues to provide a repayment program for debts that are owed. Under Chapter 13 bankruptcy, a three-year or a five-year repayment plan is created for specific creditors according to the rules governing bankruptcy and through agreement by all parties involved. The arrangements are all overseen by a trustee who is appointed by the Federal court.


When someone files a Chapter 13, it means that they are not able to repay their debt obligations as they originally agreed to do when the debt was taken on. Chapter 13 bankruptcy law allows for these debts to be reorganized for the purpose of repayment. This is different than a Chapter 7 one, in which the debts are discharged immediately instead of being set up with a repayment schedule.


In most cases, a Chapter 13 one has a repayment plan in which the debtor makes monthly, bimonthly or weekly payments to the trustee. The trustee then provides help by taking care of properly dispersing the payments to the creditors. In most instances, the amount of the debt has been restructured and is less than the full amount that is owed to all the creditors.


It is the trustee in a Chapter 13 bankruptcy who is in the position of analyzing the financial situation of the person filing for bankruptcy, so that he can make a reasonable repayment plan and set the dollar amount of the payments that are to be made to the court monthly. The trustee looks at the earning potential of the family, or the individual, and notes any obligations and living expenses that are needed and then decides on the amount the debtor will be able to repay over the course of the repayment plan.


Because a Chapter 13 requires that regularly scheduled payments be made to the court, it is generally recommended only for debtors who have a regular and stable income. For those who are seasonal workers or freelancers, filing Chapter 13 bankruptcy is not the best solution for their financial troubles, in most instances.


When a debtor has agreed to the terms and payment plan of a Chapter 13, it is crucial that they always make their payment to the court on time. If they fail to make their payments as agreed, the entire court record and case can be thrown out.


Should this happen, the creditors once again have the right to come after the debtor for the full amount of the debt and the protections under the bankruptcy relief process would not be available to them until they are eligible to file it again.


If it occurs that a debtor, who is under a repayment plan through a Chapter 13, is not able to keep up with the payment schedule, then there is the possibility to find relief from the reorganization provisions agreed upon. In the case of a situation that arises, in which the debtor is unable to make the payments to the court as agreed, such as in the case of losing a job or other source of income or if they have an extended illness, they might be able to file a bankruptcy claim form known as a "hardship discharge."


For a debtor who has agreed to a Chapter 13 bankruptcy repayment plan to be able to seek a "hardship discharge," the case cannot qualify to be changed into a Chapter 7 one instead. It is best to have a bankruptcy attorney reviews the various guidelines and requirements before trying to make any type of changes to a Chapter 13 plan.


Any type of change to a filing Chapter 13 bankruptcy means that the debtor must return to the court and this step can be both stressful and expensive. Because of this, it is strongly recommended to make every effort to stick to the repayment plan.

Educate yourself further about a chapter 13 bankruptcy from Mike Selvon articles portal. Your feedback is valued and appreciated at our bankruptcy information blog where a free audio gift awaits you.

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