Is Chapter 13 Bankruptcy right for me?

Most bankruptcies - some 70% nationwide - are Chapter 7 bankruptcies. There can be circumstances, though, when you may be required to file a Chapter 13 bankruptcy or choose to do so voluntarily.

There are three main reasons our clients file Chapter 13 bankruptcies:

We are required to ...

When a bankruptcy is being prepared to file, we are required to fill out forms known as the “means test”. If your average household income is over the median for a family your size, then we must go through a series of mathematical calculations to determine how much, if anything, we are required to pay through a Chapter 13 Plan.

You won’t necessarily have to pay all of your unsecured debts in full, but, over the course of the next three to five years, you would be required to pay at least a portion of your unsecured debts.

The trade-off is that, in exchange for making partial payments to your creditors, you can stop all garnishments and bank levies. Creditors can’t harass you - they can’t even call you. If you make your Plan payments, you are done with your unsecured creditors forever ... even if you only pay them pennies on the dollar!

To stop the foreclosure ...

Sometimes, our clients fall behind on their house payments and are facing a potential foreclosure. A Chapter 13 bankruptcy, even for those clients who otherwise would qualify for a Chapter 7, becomes an option. The bankruptcy filing stops the foreclosure proceedings and brings you back to even with the mortgage company.

After we file the bankruptcy petition and stop the foreclosure, we prepare a Chapter 13 Plan based upon how far you were behind on your mortgage when you filed. For example, if you are $12,000 behind on your payments when you file, we divide the $12,000 by 60 (five years of payments), and you would pay your mortgage company - through the bankruptcy Court - $200/month to catch up on your payments. Now, you will have to remain current on your post-petition mortgage payments as well as making payments on your arrearages, but, as long as you remain current on your post-petition mortgage payments and your Plan payments, the mortgage company cannot foreclose on your property.

To protect assets ...

When you file bankruptcy, you are required to list all your assets. For most clients, all their assets are protected by state laws called “exemptions”. There are different categories of protections, from your home to your car to you household goods.

There are some assets, though, which are not protected by an exemption, like a boat or stock held outside of a retirement account.

So, let’s say you have a $18,000 boat, and you want to keep your boat. Even if you qualify for a Chapter 7, you can voluntarily file a Chapter 13 bankruptcy and keep your boat. The trade-off is that we would file a Chapter 13 Plan and pay the Court $300 per month for 60 months ($18,000). Our client gets to keep their boat, while the creditors get paid the value of the boat, even though it takes five years to get them paid.

Conclusion ...

Are you ready to take the first step towards a brighter financial future? Contact us today to schedule a consultation with a trusted Chapter 13 bankruptcy attorney in Bozeman, MT. Let us help you keep your home and reorganize your debts, providing you with the support and guidance you need to move forward with confidence.