When a person is faced with a great deal of debt, they may feel overwhelmed and unsure of where to turn. Fortunately, if you’re reading this, you are in the right place. Contact a seasoned Memphis, TN Chapter 13 bankruptcy lawyer from the Arnold Law Firm today to learn more about how we can help you through each phase of the process ahead.
If you are struggling with unmanageable debt and need help, the most important thing you can do is retain the services of a competent Memphis, TN consumer bankruptcy lawyer. Our firm is here to answer your questions regarding your financial issues and concerns, and we will develop personalized solutions for your financial problems.
Chapter 13 bankruptcy is one of the more commonly used bankruptcy chapters, along with Chapter 7. Under a Chapter 13 bankruptcy, also known as wage earner’s bankruptcy, a debtor proposes a reasonable payment plan and is allowed to repay his or her debt over an extended period of time, generally three to five years. This lengthy time period is due to the fact that Chapter 13 involves regular monthly payments to the Chapter 13 trustee for the plan period. The Chapter 13 plan, or simply the payment plan, is how Chapter 13 works. Chapter 13 is an attempt to “reorganize” an individual’s debt by paying certain creditors over a period of time.
Chapter 13 bankruptcy is particularly helpful for debtors who are facing foreclosure of their homes or repossession of their vehicles. A Chapter 13 payment plan allows debtors to get caught up on missed mortgage payments over an extended period, which can ease the financial burden of doing so. In the case of a vehicle loan, a Chapter 13 payment plan will allow a debtor to repay the balance of the loan in fixed payments over the course of 60 months and may limit the interest on the loan. The result is often a lower monthly payment to the lender.
Unfortunately, Chapter 13 bankruptcy isn’t for everyone. It requires you to use your income to repay some or all of your debt, and you’ll have to prove to the court that you can afford to meet your payment obligations. If you can’t do this, however, you may still qualify for Chapter 7 bankruptcy, in which case a seasoned Memphis, TN Chapter 7 bankruptcy lawyer from our firm can help you through that process as well.
Below, our Chapter 13 bankruptcy lawyer has provided answers to the most frequently asked questions we hear about Chapter 13 bankruptcy. Note, however, that this is general information; for advice on your specific case, please contact our firm to discuss your situation with an experienced bankruptcy attorney. That said, some of the most common questions we hear are as follows:
This type of bankruptcy creates a repayment plan for you to pay off your debts over a set period of time, usually five years. Rather than simply eliminating eligible debt, as Chapter 7 bankruptcy does, a Chapter 13 reorganizes the debt into a payment plan, which usually limits or reduces the amounts that must be repaid. Since Chapter 13 dedicates part of your income to the repayment of debts, it is often called “wage earner’s bankruptcy.”
Yes, prior to filing for Chapter 13 bankruptcy, you must attend credit counseling.
As soon as someone files for bankruptcy, creditors can no longer engage in collection activities — like those harassing phone calls or a garnishment of your wages. Any lawsuits by creditors are also put on hold and your property cannot be seized by creditors.
No. Spousal support, child support and tax debt are not included in the debts covered by Chapter 13.
People who fall behind on mortgage payments often choose Chapter 13 bankruptcy because it allows you to catch up on missed payments and keep your home.
Bankruptcy of any kind generally does not get rid of student loan debt obligations. But student loan payments are often more manageable when other debts are wrapped into a Chapter 13 repayment plan.
Credit card debt is a type of unsecured debt, meaning it is not backed by collateral like your mortgage or car payment. A Chapter 13 repayment plan requires you to repay all secured creditors and priority debts, such as child support, as well as at least a portion of any unsecured debt. Typically, a Chapter 13 plan requires a debtor to repay only a small percentage of credit card debt — as low as 10 percent.
No. Only individuals and married couples can file for Chapter 13 bankruptcy. Businesses do not qualify.
A Chapter 13 bankruptcy can help deal with tax debt by setting up a payment plan. Depending on the age of the debt and type of tax owned, you may be able to get rid of the tax debt by paying only a percentage of what is owed.
You can only file for Chapter 13 if you have not discharged debts through Chapter 7 bankruptcy within the past four years or through another Chapter 13 within the past two years. Once those time frames lapse, you can file again.
Some debts must be paid in full under Chapter 13, while others only have to be partially paid. Priority debts, such as child support, must be fully paid. Mortgage and vehicle payments, called secured debts, are generally expected to be paid in full, although secured debts can sometimes be reduced based on the value of the collateral or by limiting the interest rate. Your repayment plan will include repayment of at least some of your unsecured debts, such as medical bills and credit card debt.
Yes. If you have more than $336,900 in unsecured debt or more than $1,010,650 in secured debt, you will not be eligible to file for Chapter 13 bankruptcy.
Your initial office visit with a bankruptcy attorney is free. If you are not sure what to do next or need more information, contact us to take advantage of our free consultation to analyze all your options. Mr. Arnold, of the Arnold Law Firm, is a member of the National Association of Consumer Bankruptcy Attorneys, and he is prepared to put his knowledge, dedication, and experience with the law to work for your case.