Reasons Why Chapter13 Is Often The Best Choice

Reasons Why Chapter13 Is Often The Best Choice

WHEN IT COMES TO CONSUMER BANKRUPTCY CHAPTER 13 IS OFTEN THE BEST CHOICE

Even though Chapter 7 bankruptcy can have many benefits for the Debtor who qualifies and has mainly unsecured debt they are seeking relief from, Chapter 13 bankruptcy has many advantages over Chapter 7.  Chapter 13 has the following advantages:

  • If a Debtor is behind on mortgage payments and wants to save their home from foreclosure, Chapter 7 can prevent a foreclosure, but only for a temporary time.  Chapter 13 allows for the restructuring of the arrearages to be paid over time.
  • An unsecured mortgage lien can be stripped off in a situation where the Debtor is underwater on their mortgage.
  • Chapter 13 bankruptcy allows a Debtor to keep their options open.  The Debtor can most of the time dismiss and refile, can voluntarily dismiss the Chapter 13 or can convert to a Chapter 7 bankruptcy.
  • Mortgage holders are generally willing to work with a Chapter 13 Debtor related to loan modifications.
  • For a short period of time a Debtor can get a vehicle back after repossession.
  • If a motor vehicle was financed more than 910 days prior to a Chapter 13 bankruptcy, the creditor can be paid the value of the vehicle instead of what is owed on the vehicle.  Additionally, Debtors who have a clear title to a vehicle and then borrow against that vehicle can pay the lender the value instead of what is owed.
  • Debtors can avoid the Reaffirmation Agreement process in Chapter 13  and avoid the risks associated with reaffirming the contract on a vehicle.
  • Debtors do not surrender non-exempt property in a Chapter 13.
  • Debtors maintain control over the disposition of non-exempt assets in Chapter 13 and can benefit from creditors not filing a claim in their Chapter 13.
  • Ability to deal with tax problems in Chapter 13.
  • Flexibility in the payment of attorney’s fees.

This is in no way an exhaustive list of the advantages of Chapter13, but it is some of the more common advantages. Please give me a call at (800) 867-1583 if you are considering filing a Chapter 13 bankruptcy and we can talk about your specific situation.

As always, any opinions expressed on this website are just that, opinions. Your individual situation might be different than outlined above, so it is probably best that you give me a call to discuss your individual situation. I pride myself on giving you the answers to your questions that are based on your individual circumstances.

Debt Limits for Chapter 13 Debtors

Debt Limits for Chapter 13 Debtors

IF YOUR DEBT EXCEEDS A CERTAIN LEVEL YOU CANNOT FILE A CHAPTER 13 BANKRUPTCY

Even though Chapter 13 is the best or only solution for you from a bankruptcy standpoint, you might not be qualified to file a Chapter 13 bankruptcy because of the debt limits.As of April 1, 2016, a debtor cannot have more than $1,184,200.00 in non-contingent, liquidated secured debt and $394,725 in non-contingent, liquidated unsecured debt. If you owe more than these amounts you can only file a Chapter 7 or Chapter 11mbankruptcy.

Please give me a call at (800) 867-1583 if you are considering bankruptcy.

As always, any opinions expressed on this website are just that, opinions. Your individual situation might be different than outlined above, so it is probably best that you give me a call to discuss your individual situation. I pride myself on giving you the answers to your questions that are based on your individual circumstances.

Reorganizing Payments on Student Loans in Chapter 13

Reorganizing Payments on Student Loans in Chapter 13

USING CHAPTER 13 BANKRUPTCY TO REORGANIZE PAYMENTS ON STUDENT LOANS

Under the United States Bankruptcy Code Section 523(a)(8), student loans are generally non-dischargeable in a bankruptcy. Since there is no dischargeability it is important to find a method to deal with the servicing of the debt.
 Chapter 13 bankruptcy can be a good vehicle for managing payments on student loan debt, because the Debtor is only paying the debt according to their available disposable income while they are in the bankruptcy.  I have even had clients who have filed a Chapter 13 because of student loan debt and upon completion of the plan, have refiled Chapter 13 because their disposable income still did not allow to pay the normal scheduled payment.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation.  Bankruptcy, as many other areas of the law, can be very case or fact specific.  I pride myself on giving you the answers to your questions that are based on your individual circumstances.
What Happens to My Property When I File a Chapter 13 Bankruptcy?

What Happens to My Property When I File a Chapter 13 Bankruptcy?

Debtors do not surrender any property they might own in a Chapter 13 bankruptcy filing.  The Debtors remain in possession of the property.

To the extent the Debtors in a Chapter 13 bankruptcy own property that cannot be exempted under the Bankruptcy Code or Texas law, then their obligation is to pay to the Chapter Trustee during the commitment period an amount of money that equals the value of the non-exempt property.   For illustration purposes lets say that the Debtors own a boat valued at $5,000.00 and there is no ability to exempt the boat in the Chapter 13.  In this scenario the Debtors are required to pay to the Trustee the amount of $5000.00 over the course of the Chapter 13.  This $5,000.00 must be paid to the unsecured creditors, so payments to the unsecured creditors in the proposed Chapter 13 Plan must equal or exceed the value of the non-exempt property.

What happens in a Chapter 7 bankruptcy filing to non-exempt property?

As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation.  Bankruptcy, as many other areas of the law, can be very case or fact specific.  I pride myself on giving you the answers to your questions that are based on your individual circumstances.

What Happens to My Income Tax Refund in a Chapter 13?

What Happens to My Income Tax Refund in a Chapter 13?

INCOME TAX AND BANKRUPTCY EAST TEXAS

If the Debtor in a Chapter 13 case has been required to file federal income tax returns in the years prior to the filing of bankruptcy, then a refund amount for future years is estimated based on these refunds and circumstances of the past.

All Chapter 13 bankruptcy filings are based on a budget that is proposed by the Debtor which reflects all of the Debtor’s income and expenses.  The income of the Debtor includes any estimated income tax refund, because any refund represents money that the Debtor did not actually owe to the Internal Revenue Service.

An example of a typical scenario in a Chapter 13 case might help to understand income tax refunds in a Chapter 13 case. Assume that the Debtor received a refund of approximately $3,000.00 in the year prior to the filing of bankruptcy.

Again, because that money was not owed to the Internal Revenue Service it is added to the Debtor’s income in the proposed Chapter 13 budget.

Since that income is available to fund the Debtor’s Chapter 13 Plan the estimated refund amount will be given to the Debtor.

If the refund amount from the Internal Revenue Service exceeds the estimated amount put in the budget (i.e. The amount estimated in our sample case, $3,000.00), then the Debtor is required to turn the excess refund amount over to the Chapter 13 Trustee.

So, if the Debtor receives a refund of $4,000.00, then $1,000 must be turned over to the Chapter 13 Trustee.  This $1,000.00 will go to pay unsecured creditors in the Debtor’s case.

Income tax refunds are of course monitored by the Chapter 13 Trustee through a review of the annual income tax returns of the Debtor during the pendency of the case.

Debtors are required to furnish a copy of their return to the Chapter 13 Trustee within ten (10) days of filing the same with the Internal Revenue Service.

One important thing for a Debtor to keep in mind when calculating refund amounts is that the Trustee will not allow the Debtor to deduct amounts paid for a rapid refund.

So, if the Debtor is paying $200.00 to the tax preparer for a rapid refund and is required to turn over $1,000.00 to the Trustee, the $1,000.00 cannot be reduced by the rapid refund amount.

The Trustee will however allow for the deduction of the normal fee paid for the preparation of the income tax return.

As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation.  Bankruptcy, as many other areas of the law, can be very case or fact specific.  I pride myself on giving you the answers to your questions that are based on your individual circumstances.

About Your Chapter 13 Plan Payments

About Your Chapter 13 Plan Payments

CHAPTER 13 PAYMENTS

All Chapter 13 Plan payments are due thirty (30) days after the bankruptcy is filed. 

If you are employed, then a Motion will be filed with the Bankruptcy Court asking for an Order to be served on your employer requiring that the bankruptcy plan payments be withheld from your wages.

This process takes some time to complete, so I always recommend to the client that if they receive any paychecks subsequent to the filing of their bankruptcy case where wages have not been withheld, that they make the payment directly to the Trustee. 

All plan payments in the Eastern District of Texas have to go the following address:

Chapter 13 Trustee

PO Box 734

Tyler, TX 75710

The amount that is withheld from each paycheck depends on the pay cycle of the Debtor employee.

For example, if you are paid on a bi-weekly basis and your plan payments are $500.00/month, then $230.77 should be withheld from each paycheck.

The reason it is not $250.00 is that there are 26 pay periods in the year for a person who is paid bi-weekly.  The withholding would be $250.00/pay period if you are paid semi-monthly.

Chapter 13 plan payments are withheld from wages in the same manner that child support is withheld, so to reiterate, the amount withheld from each paycheck is determined by how often you are paid.

In our example, if $230.77 is not withheld from the first paycheck you receive after the filing of your bankruptcy case, then you need to remit that amount directly to the Chapter 13 Trustee.

All payments made to the Chapter 13 Trustee have to be by Cashier’s Check or Money Order.  You should retain a copy of the payment for proof and always note your case number on the check or money order.

Presently there are four ways that plan payments can be made to the Chapter 13 Trustee in Tyler.  For a memo regarding these methods directly from the Trustee’s website go here.  If you want to set up a bank account for payments to be made you can find the information on how to set that up through TFS go here.

Please do not send plan payments to our office.  They must be sent directly to the Chapter 13 Trustee.

If your plan payments become delinquent, then you are not in compliance with the terms of your plan of reorganization and the Chapter 13 Trustee will not agree to confirmation of your plan, or in a confirmed case, will move to dismiss your bankruptcy.

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