You could be struggling with your finances even with a regular income because of several reasons. If you are out of options and need a fresh start, you could consider filing for bankruptcy. People who earn a significant income with valuable property to protect may choose to file for Chapter 13 bankruptcy.

Under Chapter 13 bankruptcy, you get debt relief and pay your discretionary income to creditors throughout the next 3 to 5 years. Additionally, while some other options may require you to give up your assets, this Chapter offers you a new path to pay back your debts. If you understand how Chapter 13 repayment plans work, you can make an informed decision if filing for bankruptcy under this Chapter will best serve your circumstances and needs.

Here are 3 important things that you should know when it comes to the Chapter 13 repayment plan:

1.     How to Handle Debts?

The U.S. Courts require Chapter 13 bankruptcy plans to provide for the total repayment of priority debts. These claims are supposed to include debts like bankruptcy filing costs and taxes. However, people may choose to make alternative arrangements with priority creditors in some cases.

If some people want to keep their collateral attached to secured debts under this Chapter, they need to include repayment of these claims in their plans. Additionally, if their plans utilize all their projected disposable income over the repayment period, they may not have to pay back certain unsecured debts. So, once their bankruptcy is discharged after the completion of the repayment period, they will be free from owing such claims.

2.     How to Make Payments?

Under Chapter 13 bankruptcy, your repayment plan usually spreads out over three to five years. The United States Bankruptcy Court for the District of New Jersey requires a Chapter 13 plan to:

• Provide for payments of regular fixed amounts (usually monthly) to the trustee
• Provide for the complete payment of all claims that are on priority (such as taxes and child support), unless otherwise the claim is agreed upon to be treated differently
• Provide for equal monthly payments to be made to secured creditors through the Chapter 13 plan
• Provide for the same treatment for each claim within each class (in case the plan classifies claims)

You will have to start making payments to the Chapter 13 trustee within the first full month following the filing of the case. Your trustee will then distribute the specified funds to the appropriate creditors.

3.     When Can Your Case Get Dismissed?

If you fail to make plan-prescribed payments, it may result in the dismissal of your case. If in arrears at the meeting of creditors, your bankruptcy trustee may dismiss your case without any further hearing or notice. Also, your bankruptcy trustee may choose to drop your Chapter 13 bankruptcy petition if you fall 45 days or more behind on your payments.

You can file for Chapter 13 bankruptcy as it offers several benefits when you are struggling with overwhelming debt. However, you should remember these three crucial things about the Chapter 13 repayment plan. If you fail to complete the requirements of this plan, it may have serious implications.

Bankruptcy is a term dreaded by both businesses and individuals mainly because of its long-term impact on their credit worthiness. However, there are many situations when bankruptcy works the best to help individuals get rid of their debts and make a fresh start. An expert lawyer firm can help you clearly understand your financial position and explain the various options available to you and their pros and cons, besides helping you through the complete gamut of bankruptcy proceedings.

Resolving Financial Woes

A study has revealed that two-thirds of people who file for bankruptcy in the US cite medical issues as the key reason for their financial woes. Other reasons include piling up of credit card dues, divorce or separation, and the inability to make mortgage payments. However, before you decide to file for bankruptcy do explore other options like non-profit credit counseling, debt consolidation and debt settlement. You can discuss your debt dilemma with a legal expert who will also help you negotiate with your creditors to work out alternate schedules for repayments or waiving off some portion of the debt.

Filing for Bankruptcy

After all other options to deal with your debt problem have been ruled out, bankruptcy is considered. The United States Bankruptcy Code governs the bankruptcy proceedings across different courts. You have the option to choose between Chapter 7 or Chapter 13 bankruptcy filings.

Chapter 7

In the case of a Chapter 7 filing, individuals are required to voluntarily turn over their assets to the bankruptcy Court. These assets are then sold and the proceeds used to pay back the creditors. This leads to the discharge of the debt of the individual filing for bankruptcy. Some categories of assets like the motor vehicles owned by you, clothing, pension amount, personal jewelry, household goods and appliances may be exempt from the categories of assets to be handed over. The option of Chapter 7 bankruptcy filing is, however, available only if the individual’s income for the last six months is less than the median income in his/her state. If the earnings are more than the state median level, Chapter 13 bankruptcy is recommended.

Chapter 13

The Chapter 13 bankruptcy is a little more complicated and takes a longer time for the discharge of debts. It applies to individuals who have income and the ability to manage the debt under a different payment plan structure. This option offers individuals an opportunity to save their homes from foreclosures besides rescheduling their secured debts for repayment over the life of the Chapter 13 plan. This bankruptcy option protects third parties who are liable with the debtor on consumer debts or co-signers. An important feature of this bankruptcy option is that individuals have no direct contact with the creditors and all plan payments are made to the trustee who in turn distributes them to the creditors. Since the bankruptcy law regarding the scope of Chapter 13 discharge is complex, debtors should consult competent lawyers before filing for bankruptcy.

Going for Credit Counseling

US laws make it compulsory for individuals seeking bankruptcy relief to get credit counseling from a government-approved organization. The course must be completed within 180 days before the filing as it helps in deciding the best option for resolving your credit woes. The course can be done online or by phone or in person and the certificate for the same has to be shown to the court.

Fill the Required Forms and Pay the Court Fees

The next step is go ahead and fill the necessary court forms and pay the court fees. Once you have completed all the formalities in accordance with the law and the bankruptcy petition has been filed, the court appoints a trustee to oversee the case. Applicants need to start paying their Chapter 13 payments one month after their application is filed even if the court has not approved or confirmed the proposed plan. However, if the bankruptcy court does not confirm the suggested plan, your attorney will make the necessary changes

Creditor Meeting

An important step in the bankruptcy proceedings is a meeting with the creditors. Mandated by the section 341 of the bankruptcy code, this meeting involves the presence of the trustee, the individual applying for bankruptcy and the creditors.

Debtor Education Course

Before the final discharge of debts, the individual who has filed for bankruptcy will need to complete a post-filing debtor education course from a government-approved organization. This course helps to learn budgeting, money management and use credit wisely.

To ensure the smooth completion of bankruptcy proceedings and the discharge of debts it is best that the services of an expert bankruptcy lawyer are sought. This will not only ensure that the petition is not rejected on grounds of improper filings or discharge of wrong debts.

Nowadays, it’s all too easy to sink into debt, but it’s extremely difficult to get rid of it. You may be watching your debts pile up month after month while you don’t have enough money to make ends meet. As you face this difficult time in your life, you may wonder what you can do to get out of debt and regain control of your life and finances. Fortunately, there is a legal alternative that could be helpful to you. As you might imagine, we’re talking about bankruptcy.

Now, bankruptcy may be the answer to your financial problems, but not everyone qualifies for it. You need to keep in mind several factors to know if you qualify for your preferred bankruptcy chapter or if you’ll have to look for other options to get the fresh financial start you need.

Here you will learn how you can determine if you qualify for Chapter 7 bankruptcy and how a bankruptcy attorney may help you navigate the process.

What is chapter 7 bankruptcy?

One of the most important decisions you will have to make during your bankruptcy filing is which chapter of bankruptcy you wish to file. Bearing this in mind, you should know that the most popular type of personal bankruptcy is Chapter 7 bankruptcy.

Chapter 7 bankruptcy will enable you to get rid of most of your debts in a matter of months. To accomplish this, your non-exempt assets will be sold by a court-appointed bankruptcy trustee. The trustee will then use the proceeds to pay your creditors.

So, if you are looking for a quick solution to your debt problems and don’t mind the prospect of having to sell some of your assets to do so, Chapter 7 may be your best option.

However, qualifying for Chapter 7 bankruptcy is not as simple as it may seem. To do so, you will have to pass a means test that will assess your finances and determine if you meet the financial requirements to be eligible for this debt relief solution.

Is your income low enough?

The first phase of the means test will determine if your income is below or above the state median. Income includes wages, bonuses, tips, salaries, overtime, commissions, interest, royalties, workers’ compensation, tax returns, and more. Essentially, most of your money inflows.

If your current income is below the state median for households similar to yours, you will automatically qualify for Chapter 7; you won’t have to complete the rest of the means test.

However, if your income is higher than the state median, you will need to proceed with the rest of the test to determine if you qualify.

The bankruptcy means test

The means test is designed to restrict the use of Chapter 7 bankruptcy. The goal is to make this solution available only to those who indeed cannot pay their debts.

To do so, it deducts certain monthly expenses from your current monthly income to determine your “disposable income.”

As a rule of thumb, the higher your disposable income, the less likely you are to qualify for Chapter 7 bankruptcy. The point is, if you have enough disposable income each month, you should use it to pay your creditors.

Now, if your income is too high, but you still want to get rid of your debts, you may want to consider Chapter 13 bankruptcy instead. In this type of bankruptcy, you will have to create a 3-to-5-year repayment plan. Once you complete it, most of your remaining debts will be discharged.

Other requirements to keep in mind

Besides your monthly income, there are other details you should consider to find out if you are eligible for Chapter 7 bankruptcy:

           Pre-bankruptcy credit counseling is mandatory:

           Before filing for any type of bankruptcy, you must complete a credit counseling course conducted by an approved agency. You are required to attend this course six months before your bankruptcy filing. Otherwise, your filing may be dismissed.

           There must be nothing suspicious about your finances:

           Bankruptcy courts will carefully evaluate your finances after your filing. If they find anything suspicious, such as that you transferred money or assets to family members to avoid losing them or that you maxed out your credit cards to abuse the process, your filing could be denied, and you might face fraud charges.

What if you filed for bankruptcy before?

If you previously filed for bankruptcy, you will have to wait some time before doing it again. To be exact, you have to wait eight years after a Chapter 7 bankruptcy filing before filing again, and six years in case of a Chapter 13 filing.

Should you work with an attorney during your filing?

Working with a Los Angeles bankruptcy attorney during your bankruptcy filing could be very helpful to you and will maximize the chances of success of your filing.

The attorney will help you choose the bankruptcy chapter that best fits your financial situation and advise you during the means test to ensure that you include all the required information without making unnecessary mistakes.

Overall, working with an experienced attorney may be your best option if you want your bankruptcy filing to be effective, simple, and stress-free.

Can Bankruptcy Preserve Home Ownership?

Because of the COVID-19 pandemic, FHA mortgage delinquency rates recently hit an all-time high. Observers do not expect delinquency rates to decrease significantly until at least the spring of 2022. As a result, as coronavirus financial protections end, many people will need to take measures to save their homes against banks which are eager for money.

These creditors are likely to be even more aggressive than ever before in 2021. In many states, lenders can begin foreclosure proceedings after just one missed payment. Because the Supreme Court has recently watered down some protections in the Fair Debt Collection Practices Act, that may become the majority rule very soon.

Bankruptcy, and especially Chapter 13 bankruptcy, is the best way for distressed homeowners to stay in their homes. As a bonus, bankruptcy does more than stop foreclosure proceedings. It also makes homes more affordable, at least in many cases, so home ownership becomes more sustainable.

Automatic Stay Issues

Simply filing the bankruptcy petition does not automatically stop foreclosure. The parties handling the foreclosure, which is normally the loan servicing company and the local county sheriff, must receive actual notice via the creditor matrix. If foreclosure is imminent, best practices dictate direct notice as well.

Buying and selling mortgage-backed securities (MBS) is not as common today as it was before the 2008 financial crisis. But it still happens. As a result, the homeowner might not know the current servicing company’s identity, even though the servicer is legally required to divulge this information.

So, when preparing the matrix, do not exclusively rely on the information the debtor provides. Check the county deed records as well. Then, if things go sideways, you can at least prove you did your due diligence.

The local sheriff is usually not part of the paperwork until the foreclosure sale itself. So, review the foreclosure sale notice, if the client provided it, and deliver notice, including the bankruptcy case number, to the person in charge of the sale.

Maximizing the Homestead Exemption

Georgia’s homestead exemption is rather limited. Single filers can exempt up to $21,500. If the client has lived in the home for more than ten years, the equity amount probably exceeds that ceiling. To maximize the exemption and therefore keep the trustee from seizing it, it’s important to understand the difference between fair market value and bankruptcy value.

Assume Duane has $40,000 of equity in a home worth $200,000, according to the tax assessor’s website. According to those figures, which do not account for the fact that the house needs substantial foundation work, the trustee is free to sell Duane’s home, pay off his $21,500 equity exemption, and distribute the remaining proceeds to creditors.

But not so fast. The COVID-19 pandemic has depressed the real estate markets in many places, driving already low home investor offers even lower. And these are the offers that matter in this context. Schedule A requires debtors to list the as-is cash value of a particular asset.

So, at least one home investor’s written offer for Duane’s $200,000 house would be as low as $50,000. After the trustee pays the equity exemption and bears all other costs, mostly the cost of repairs, there might be almost nothing to distribute to creditors. According to the Bankruptcy Code, that fact makes Duane’s house untouchable.

Bankruptcy Affordability Options

These same valuation principles apply to some advanced bankruptcy options which a Georgia bankruptcy lawyer can unlock. If these options apply, the homeowner could save a considerable amount of money.

Lien stripping is a good example. This option is usually available if the homeowner used 80/20 financing to buy the home and the home’s value has decreased at least 20 percent. In that situation, the house’s value is not high enough to secure both liens. Therefore, the junior lien is an unsecured debt which is subject to discharge.

Other options, which are often available if the UPB (unpaid principal balance) of the loan is below $20,000, include a cram-down. If the homeowner makes accelerated payments and remits the home’s current fair market value to the lender, the bank might have to forgive the rest of the loan.