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If you are facing foreclosure due to past due mortgage payments, you may be thinking
about a mortgage modification, a short sale or some type of forbearance program to give
you time to get caught up. After dealing with these issues for years, what I can tell you
is that, unlike each of the programs I just mentioned, a Chapter 13 bankruptcy filing
forces a mortgage company to give you time to catch up on past due payments while you
make your current payment each month. You are in control instead of the mortgage company!
In Chapter 13, you make monthly payments to a local Chapter 13 Trustee, who is appointed
by the Court. He, in turn, pays your creditors. The repayment plan is called a Chapter 13
Plan, and generally lasts between three and five years.
Any individual, even if self-employed, is eligible for Chapter 13 relief as long as
the individual has a regular income and unsecured debts of approximately $350,000 and secured
debts of approximately $1,000,000. These amounts are adjusted periodically to reflect changes
in the consumer price index. A corporation or partnership cannot be a Chapter 13 debtor.
There are three types of creditors in a Chapter 13 case: priority, secured, and unsecured.
Priority claims are granted special status under the bankruptcy law, and they include
most taxes. They have to be paid in full throughout the bankruptcy Plan. However, some taxes are,
in fact, dischargeable.
In the case of secured debt, such as a car, if you want to keep the collateral, you must
pay the regular monthly payment due, or at least the value of the collateral through
the Chapter 13 Plan. There may be special circumstances here depending on how recently
a car was purchased.
In the case of unsecured debt, which generally consists of medical bills, credit cards and
personal loans, there is substantial flexibility, and depending on your particular income, expenses
and assets, you may be required to pay all, some or nothing toward these creditors. Once
your Chapter 13 Plan is completed, whatever you have not paid to unsecured creditors are
discharged and your obligations on those debts are over.
Let the lawyers at The Sader Law Firm help by giving you a personal evaluation of your
case options. Take a moment right now and fill out the contact form on the left side
of your screen or just give us a call. We are happy to provide absolutely free phone
consultations with an attorney in our Kansas City office who will review your situation.