When considering bankruptcy, a consumer has two choices – a Chapter 7 liquidation or a Chapter 13 reorganization. This blog discusses the Chapter 13 bankruptcy process.
Chapter 13 is a reorganization bankruptcy, which means that the debtor is not liquidating debts as in a Chapter 7 bankruptcy but making reduced payments over three to five years on the financial amounts that are overdue. The bankruptcy court has noted on its website that a Chapter 13 bankruptcy reorganization can act as a consolidation loan.
In a Chapter 13 bankruptcy, debtors propose a payment plan under which to make installment payments. The plan has to be approved by the court. In most instances, the debtor’s proposed repayment plan under the Chapter 13 means that creditors won’t get paid in full.
To be eligible for a Chapter 13 the debtor cannot have more than $394,725 of unsecured debt or $1,184,200 of secured debt. A debtor must also have regular income. Unsecured debts are those debts that are not backed by property. Credit cards and medical debt are examples of unsecured debts while mortgages and car payments are secured debts.
In a Chapter 13 bankruptcy, the debtor gets to keep all of their property.
Chapter 13 is most beneficial for homeowners who have equity in their house and want to keep their home. It allows debtors to get caught up on the overdue mortgage payments while continuing to make the regular, mortgage monthly payments.
In many instances, a debtor can stop foreclosure proceedings and pay off delinquent mortgage amounts over the term of the three or five-year repayment plan by taking advantage of a Chapter 13 bankruptcy filing. In fact, the bankruptcy court has said on its website that “an individual may use a Chapter 13 proceeding to save their home from foreclosure.”
However, debtors can lose their homes if the mortgage company completes the foreclosure sale before the paperwork is filed in court. So, if you’re facing foreclosure you should speak to an Ocean City or Baltimore bankruptcy attorney as soon as possible. Debtors can also lose their home if they fail to make the regular mortgage payments that come due after the Chapter 13 filing.
Another possible advantage of a Chapter 13 bankruptcy filing for those with secured debts such as a house or car is through what is called a “cramdown.” In some instances, a debtor can reduce the amount owed on a car loan to the depreciated value. In certain circumstances, business debtors who declare Chapter 13 can get a cramdown on amounts borrowed against the house to fund their business. A Baltimore or Ocean City bankruptcy attorney can provide more details.
Filing bankruptcy requires a lot of paperwork; however, if a foreclosure is looming, a “barebones bankruptcy” with only part of the paperwork can be filed with the court to stop the foreclosure and your Ocean City or Baltimore bankruptcy attorney will let the court know that a foreclosure has been scheduled and the rest of the required paperwork will be filed with the court at a later date.
In addition to possibly stopping a foreclosure; once the paperwork is filed in court, the debtor is protected from contact with creditors and the creditors must talk to the debtor’s Ocean City or Baltimore bankruptcy attorney.
The Law Office of Thomas J. Maronick is open during the pandemic and will continue to meet your Annapolis, Baltimore, Essex, Ocean City, Towson, White Marsh bankruptcy needs. A Baltimore bankruptcy attorney can help you to determine the best way to get out of debt and out from under creditor calls. An Ocean City bankruptcy attorney can devise a strategy for you that allows you to use the bankruptcy laws to your advantage. The consultation is free.
We can meet with you remotely if you have access to Zoom. You can contact Thomas Maronick on his cellphone at 202.288.0167, the law office at 410.885.1775 or through the website for a free consultation.
