Are you trying to save your home from a foreclosure? Do you have a 2nd mortgage or Equity line on your home? Are you behind on car payments?
Instead of filing Chapter 7, filing a Chapter 13 repayment plan may be the answer.
Chapter 13 bankruptcies are an interest-free debt repayment plan through which you consolidate your debts and make one payment on all your debt over a 3 to 5 year period. While in a Chapter 13 debt repayment plan, the creditors cannot collect from you, and the creditors are required by a Federal Court order to adhere to the terms of the plan.
Basics for Filing Chapter 13 in Michigan
Known as a “Wage Earner Plan”
A Chapter 13 bankruptcy is sometimes called a – Wage Earner Plan – you must either be working or have a consistent source of income for your repayment plan to be approved by the court.
Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, IRS debt, student loans, credit card debts and other unsecured debts. You can now “strip” 2nd mortgages or equity lines from your home. IRS debt can be paid over time without penalties and interest and sometimes eliminated altogether as unsecured debt. The Chapter 13 plan is a 3 to 5 year plan to pay off and retain items you want to keep (home, car, etc…) and be debt free.
Some people think that paying a Chapter 13 plan means they have to pay back all their debts. No, similar to a Chapter 7 case you still discharge debts like credit cards, medical bills and other unsecured debts at the end of a Chapter 13 case – these creditors just get as little as pennies on the dollar through the plan and the remainder is discharged or forgiven at the end of the plan. Contact our attorney John Hicks to learn more.
Stop Foreclosure Immediately
If your home is presently in foreclosure, a Chapter 13 bankruptcy filing will stop the foreclosure any time prior to the sale, and allow you to repay your mortgage arrears through your Chapter 13 bankruptcy.
You will still be obligated to make all future mortgage payments directly to the mortgage company, but they may not foreclose to collect any outstanding mortgage payments.
A loan modification on your first mortgage may be obtained during the Chapter 13 process. Also, 2nd Mortgages and Equity Lines can be eliminated and paid pennies on the dollar as an unsecured claim if the value of your home is less than what is owed on your 1st mortgage.
At the end of your Chapter 13 plan the 2nd mortgage or equity line is discharged and the value of your home is closer to what you actually owe on it!
Strip 2nd Mortgage and Equity Lines
If you have a 2nd Mortgage or Equity Line on your home we can often discharge the debt and eliminate the lien through a Chapter 13 plan. Not many people can sell their home today for more than is what is owed on their 1st mortgage.
If that is the case, then the 2nd mortgage or equity line is totally unsecured in a chapter 13 proceeding. The mortgage company or bank gets as little as pennies on the dollar in the Chapter 13 plan and then the balance owed at the end of the plan and the lien is discharged. Your home is now worth closer to what you owe on the 1st mortgage.
Save Your Car
Are you behind on car payments? A Chapter 13 bankruptcy will also stop the finance company from repossessing your car. The past due payments and the entire balance on your vehicle loan will be consolidated, which you will pay off over the next three to five years.
Often we can lower the amount owed on the car to the fair market value of the vehicle and we can always reduce high interest rates to a reasonable amount! The vehicle finance company can no longer repossess your car, and you will no longer have to make a payment directly to the finance company. Only one payment is made, and that is to the Chapter 13 trustee. Under certain circumstances we can even recover your vehicle after repossession and consolidate.