Chapter 13 Bankruptcy Information

Matthew Foley

Matthew Foley

Esq. & MBA

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Benefits of a Chapter 13 Bankruptcy

Chapter 13 offers individuals a number of advantages over liquidation under Chapter 7. Perhaps most significantly, Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under Chapter 13 protection.

Protect Your Home

Chapter 13 bankruptcy can protect a home from foreclosure and remove (strip) a second mortgage. The home is protected from foreclosure by including reimbursement terms within the bankruptcy, thereby allowing the loan to become current. In addition, the second mortgage can be removed from the home through a lien avoidance procedure in bankruptcy. To strip junior liens, such as a second mortgage, the home has to be worth less than the amount of the outstanding first mortgage. In such circumstances, the junior lien can be legally determined as unsecure and can be eliminated. The value of the home is determined by conducting a residential appraisal.

 

Protect Your Car

Chapter 13 bankruptcy also provides Tucson debtors with the ability to favorably renegotiate the terms of vehicle financing by lowering the payoff, interest rate, and payment. If a vehicle has been owned for a period that exceeds 910 days, the vehicle (as well as other personal property) can be “crammed down,” which means that the property is paid off at its value versus the outstanding loan balance. Chapter 13 also reduces interest rates on personal property debt to prime plus a one-point margin. Finally, because a Chapter 13 plan is 3 – 5 years in duration, the vehicle payments can be averaged over this new period – a part of the process called re-amortization – which can drastically reduce a debtor’s payment within the plan.

 

Consolidate Your General Unsecured Debt

Finally, and most importantly, Chapter 13 can provide organized and effective debt consolidation accomplished through the bankruptcy court. All creditors much cooperate. The payoff on outstanding debt is primarily gauged on a debtor’s ability to repay, therefore enabling most debt to be paid off at a fraction of what is actually owed.

 

Helping Tucson & Southern Arizona Families & Businesses to Get Debt Relief

For some Tucson families, Chapter 13 bankruptcy provides an excellent debt relief option. Chapter 13 bankruptcy is routinely mischaracterized as an unattractive “repayment plan.” In actuality, a Chapter 13 bankruptcy plan provides incredible debtor assistance for particular debtors. Contact our office today to schedule a consultation and explore your options.