Paying off debt can often feel impossible, especially when you’re facing high-interest credit cards or an emergency expense sends you on a spiral of late fees and extra charges. When debt is overwhelming, chapter 13 bankruptcy may be the right option to help you overcome your financial challenges and move forward.
Chapter 13 bankruptcy, sometimes called a “wage earner’s bankruptcy,” reorganizes and restructures your debt by creating a payment plan to repay all or a portion of what you owe. Once you file, all foreclosure and debt collection attempts must cease. During this time, your debts are reviewed along with your income and monthly living expenses, and you must propose a feasible repayment plan based on applying your disposable income to debt repayment.
If your repayment plan is accepted, you will make payments to a trustee who then disperses the payments to the creditors over a time span of three to five years. At the end of this period, if you remain in good standing with the trustee, eligible debt will be discharged, regardless of how much is left to pay. It is important to be aware that failing to make the agreed-upon payments can lead to the case being dismissed and debtors to continue with collections or foreclosure processes.
All of your debt can be included in Chapter 13 repayment plans, including your mortgage and some student loans, to help you get caught up. However, only specific debt can be discharged at the end of the payment period. This includes:
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Filing for Chapter 13 bankruptcy is often the best opportunity to keep your home. If you are behind on mortgage payments and the foreclosure process has started, filing for Chapter 13 freezes the foreclosure process. Your delinquent mortgage payments are included in the debt repayment plan and you can also reschedule your mortgage into the payment plan too, which may lower your payment and give you a bit more freedom and flexibility to pay.
When the repayment period has ended, you will continue paying on your mortgage back in good standing with the lender.
While a Chapter 13 lawyer can provide you with personalized guidance as to whether this is the right option for you, this option is ideal for people who:
Have a consistent income above the state median for your family size;
Can make repayments, but are struggling with the size of the debt you are facing;
Have less than $465,275 in unsecured debt (student loans, credit cards, and medical debt)
Have less than $1,395,875 in secured debt (mortgage, car loan)
You have assets you don’t want to lose, such as a second car or your home.
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The bankruptcy court will review your income and your basic living expenses. They will use this information to determine your disposable income. Your bankruptcy attorney will play a crucial role in helping to gather this information and then presenting it to the bankruptcy court.
All of your debts (both secured and unsecured) will need to be accounted for. Your assets will also need to be accounted for. In Florida bankruptcies, some of your property is exempt from liquidation during a bankruptcy proceeding.
Chapter 13 bankruptcies do not necessarily involve the liquidation of property. The focus is restructuring your debts so that you can pay them down and eliminate them within five years. This income-driven repayment plan may be preferable to other types of bankruptcies that require you to surrender personal property.
If your disposable income is not enough to satisfy all of your debts within five years, the remaining debt can be written off.
No, if you are behind on your mortgage, Chapter 13 bankruptcy restructures your late payment into your repayment plan to help you catch up. It’s important to make regular plan payments to ensure you remain in good standing.
Chapter 13 stays on your credit for seven years, but over time, with good financial decisions, your score will improve even if it’s still on there.
Federal student loans are not, but they can be included in your payment plan to help you catch up.
A Florida Chapter 13 Bankruptcy attorney can provide specific advice and tell you how to proceed in your particular situation.
Filing Chapter 13 costs a minimum of $310 for the case filing fee and administrative fee. These can be paid to the court in installments if necessary. To work with an attorney, the average cost to file the bankruptcy petition is between $900 to $1500 depending on the complexity of the case. The balance of attorney’s fees are typically included as part of your court repayment plan. In some instances, we offer $0 down options and affordable payment plans to help you get the legal assistance you need.
If you need to stave off the foreclosure through Chapter 13 Bankruptcys, our attorneys can help you.
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