What is Chapter 13?
Chapter 13 is used primarily to keep property that would otherwise be lost. It requires presentation and approval of a Chapter 13 Plan, and takes from three to five years to complete.
Why should I consider filing for bankruptcy?
Bankruptcy can be a fresh start for you. It puts to an end to foreclosures, lawsuits, repossessions and those harassing calls and letters from your creditors. It enables you to start over again without debt. Filing for bankruptcy is not as uncommon as you may think. In fact, there were almost 40,000 personal bankruptcies filed in one recent year in New Jersey alone, 1,300,000 throughout the U.S. And since many of these represent joint filings on behalf of both spouses, the number filing is much higher. People from all walks of life claim bankruptcy, for hard times fall upon just about everyone. If you’re in a situation where your bills are piling up, you can’t see a way to pay them, and you’re looking for a solution, bankruptcy may be right for you.
When Should I Consider Bankruptcy?
Although every person’s finances are different, there are several common “symptoms” of acute financial distress. These include:
- Mortgage foreclosure
- Unable to catch up on your mortgage
- Credit card balance which gets larger each month
- Difficulty in making minimum payments on credit cards
- “maxing out” on credit cards
- Calls and letters from creditors because of overdue bills
- Being unable to get out of debt in the foreseeable future.
Experience has shown that most persons whose finances reach the levels above are unable to repay their debts in a reasonable time. Bankruptcy may be your best alternative.
What happens if I can't pay my mortgage?
Falling behind on your home mortgage is very serious. Once this happens, it is very difficult to catch up. The bank will start foreclosure and your home will almost invariably be lost without intervention.
What is a foreclosure?
Legally, it happens when your lender seeks to cut off or foreclose your right or ownership. The process will result in a sale of your home by the sheriff. While the foreclosure process takes many months, your case moves slowly but surely through the Courts to the day when your home is sold.
What does Chapter 13 do for me if my mortgage is behind?
Chapter 13 Bankruptcy will prevent foreclosure, or even stop foreclosure when it has begun. Simply put, it allows you to catch up on your overdue payments by paying them over an extended period (as long as 60 months).
Are there any other benefits of Chapter 13?
Chapter 13 also gives you the following benefits when compared to Chapter 7:
- Permits a second mortgage to be removed under certain circumstances.
- Discharges (wipes out) certain types of debts not discharged in Chapter 7, such as whose resulting from your willful act or fraud. Allows you to have Bankruptcy protection at any time. Chapter 7 has a six year waiting period.
- Co-debtor stay prohibits creditors from going after any other person responsible for your debt while you are in Chapter 13.
- Allows you to keep assets which you would otherwise lose in chapter 7
Another benefit is the Cram Down of your secured creditors, meaning that you can reduce your secured debt to the value of the collateral. For example, if you owe $10,000 on a car loan where the car is only worth $4,000 you can split up the lender’s claim to pay $4,000 as a secured debt and only a small fraction of the remaining $6,000. There are special rules affecting cram down of home mortgages which are very technical and also change as the law evolves, but home mortgages may also be subject to cram down.
What does "filing for Bankruptcy" mean?
It means getting relief for your financial problems under the federal bankruptcy code. First, your lawyer prepares an extensive financial questionnaire consisting of the Petition, Statement of Affairs, Schedules and Chapter 13 Plan. These are then delivered to the Bankruptcy Court. Immediately an automatic stay starts which is a federal court injunction prohibiting almost all creditors from taking any action outside of the Bankruptcy Court to enforce their claim. Foreclosure, no matter at what stage, stops. Your creditors, their lawyers and collection agencies must stop lawsuits, making written and telephone demands for payment, taking away your assets to collect their money, garnishing your wages, or otherwise harassing you. Also, upon filing, the Chapter 13 Trustee is appointed. You will be making payments to the Trustee for the amount of your Plan payment. The Trustee will review your petition, meet with you, and make recommendations to the Judge when your Plan is considered for confirmation. Your meeting with the Trustee is called the s.341(a) hearing and your creditors are invited to attend. We are at your side at this meeting.
What is the Chapter 13 Plan?
Chapter 13 requires us to present a Plan showing how you will reorganize your debt. A Judge of the Bankruptcy Court must review and confirm your Plan. Your mortgage arrears will have to be paid through the plan. There are other payments which must be made, such as taxes and child support obligations. Unsecured debt (where the lender does not have a mortgage or lien) usually are paid much on a much reduced basis, often as low as 10 cents on the dollar. There are several legal tests which are applied to your plan in order for it to be approved. While these are beyond the purview of this pamphlet, we will be happy to explain the confirmation process to you.
Why do I need a lawyer?
While there is no legal requirement to have a lawyer, Chapter 13 is a complex legal process and legal counsel is strongly recommended. The other players in bankruptcy will have lawyers who specialize in bankruptcy. You would be at a disadvantage to deal with them personally. In general, a lawyer is needed to review your specific financial situation and ensure that all goes smoothly with your claim. Our staff here at the firm of Ronald I. LeVine has many years of experience in bankruptcy law, and will take you through the process from start to finish. At your first consultation, one of our lawyers will personally sit down with you on a one-to-one basis and analyze your situation. We will determine if bankruptcy is right for you – for it does not benefit everyone. If it appears that filing for bankruptcy protection would be of benefit to you, we will then review, research and compile in detail the necessary facts and figures to prepare your “bankruptcy petition” for the courts. That is what the “trustee” (see page 4) will review to assess your situation. Our responsibility also includes the preparation of an accurate and complete creditors list for the courts. This will be used for communications with your creditors. And once your bankruptcy petition is filed, the court will then order your creditors to stop the collection activity, even suits, foreclosures and garnishment. This is called the automatic stay. Certain debts, including alimony and child support, are not affected by the automatic stay. One of our lawyers will also attend and assist you the one time you meet with the Trustee. Chapter 13 cases require that the Court hold a hearing to decide whether to accept you Plan. We will review any objections from the Trustee and creditors, attempt to meet or overcome their objections, present a revised Plan (if necessary) and attend the hearing to argue for confirmation. In general, we are with you, on your side, throughout the whole entire bankruptcy proceedings. We are responsible for making sure that all goes well and that all of your questions are answered.
How is my credit affected?
Your credit rating, which unfortunately was most likely already in poor shape before you filed for bankruptcy, will be worsened. However, lenders consider that completing a Chapter 13 Plan shows that you can fulfill obligations.
How long does it take to file for bankruptcy
We usually take a few weeks to gather your information to make sure that all data given to the Court is accurate. However, in an emergency (such as a foreclosure sale) we can file in matter of hours. In one recent case we met the client at 10:00, immediately prepared the papers, filed them at 12:00 and were able to appear at the sheriff’s office in time to prevent the 2:00 sale of our client’s home.
How much does filing for Bankruptcy cost?
Most times, our flat fee is less than one month’s debt payments. For our expertise and personal service you will be charged a moderate flat fee which covers everything in most cases. The rare exceptions are where a significant additional expenditure of time is necessary (more than one revision to the Chapter 13 Plan, a motion, a non-dischargibility proceeding, or other cause). Please feel free to ask us to further explain these terms and the possibility of them based on your individual case. It should also be noted that we understand the needs of the bankruptcy client, and have payment plans available which may suit you.