Financial woes seldom come in just one flavor, with many different types of debt piling up to the point of being unmanageable. Whether it is student debt, credit card debt, medical debt, or mortgage debt or a combination of any and all, it’s possible to lose everything if you don’t file for bankruptcy and do it the right way. One of the questions I am most frequently asked is, “Can filing Chapter 13 stop foreclosure?”
The answer is, “It depends.”
To understand the factors, you need to understand what filing for a chapter 13 bankruptcy actually means.
Chapter 13 bankruptcies are restructuring-type bankruptcies – also called the earner’s plan – as opposed to Chapter 7 liquidation bankruptcies. Chapter 13 restructures your debts so that they can eventually be paid off to the satisfaction of the bankruptcy court. They are more complex and take a longer time to discharge than Chapter 7. Over the course of three to five years or more if approved for cause, you will pay the bankruptcy court a given amount each month, which the US Trustee will use to pay your creditors.
Sounds simple, right?
Filing for Chapter 13 is complex. It’s not a DIY job unless you already happen to be a bankruptcy lawyer. Using a bankruptcy preparer might now cut it either, since bankruptcy preparers are not allowed to give legal advice, and are not trained in bankruptcy law at the federal or state level. If your filing is denied, you have to start all over again. That’s why it’s important to get it right the first time. Here’s how it works from start to finish.
All bankruptcies have certain qualifications that applicants must meet in order to proceed. These qualifications are revised from time to time, but specifically Chapter 13 is reserved for individuals even if they are self-employed, operating a sole proprietorship, or an unincorporated business. All petitioners must complete credit counseling within 180 days before filing a petition, and the credit counseling must be from an approved counselor. There are also monetary limits on the amount of debt. Unsecured debts may not be over $394,725 and secured debts must not exceed $1,184,200.
Corporations or partnerships are not eligible to file for Chapter 13 and must instead file for Chapter 11. You may not have filed any bankruptcy within 180 days, or have a previous petition dismissed due to failure to appear, failure to comply court, or voluntarily dismissed.
“Well, couldn’t I just file for Chapter 7? That’s the easy one, right?”
Chapter 7 is not for everyone. In the first place, being able to file for Chapter 7 is subject to a means test. If you can’t pass the test, then your filing is converted to Chapter 13.
Chapter 13 has a lot of advantages to consider over Chapter 7, including the opportunity to save your home from foreclosure. The automatic stay granted in bankruptcy immediately suspends any collections, lawsuits, liens, garnishments, or other actions. After a bankruptcy plan is approved, you may be able to cure your missed mortgage payments and get up to date – thus ending the foreclosure and keeping your home. Of course, there are some caveats – principally that the payments must be made on time. Of course, the US Trustee will determine if you will be able to make those payments based on your current income vs. the mortgage payment vs. the actual value of your home.
Let’s lay out the steps to filing for Chapter 13 and saving your home from foreclosure.
At Van Horn Law Group, we are experts in debt and bankruptcy. We have the attorneys and experienced staff that you need to get the best possible without tearing your hair out. Filing for Chapter 13 bankruptcy can help to save your house from foreclosure, but it’s a long and complicated process. Start that journey with the firm that is on your side and at your side. Our Fort Lauderdale and West Palm Beach offices are open Monday through Saturday, and by appointment on Sunday. Even better, your initial consultation is free and you may qualify for our zero down bankruptcy. Call us today!
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