Chapter 13 Bankruptcy

Are you:

If so, then Chapter 13 bankruptcy may be a very powerful tool for you. Chapter 13 can be used to

You May be Able to Lower Your Car Payments

In certain situations involving car loans that are more than 2 ½ years old, you may even be able to use a Chapter 13 case to reduce the amount you owe on the loan. This is called a “cramdown” and allows you to reduce the amount and/or interest rate owed on your loan. You pay the actual value of your car, not what you owe on it. For example, if you owe $15,000.00 on a car worth only $10,000, Chapter 13 can be used to reduce your loan amount to $ 10,000. Additionally, whether or not we can “cram down” the amount of your car loan, your car loan or not, we may be able to use Chapter 13 to lower the interest rate on your loan down to 10% or less. Chapter 13 can often be a powerful tool for lowering you monthly car payments.

A Plan to Pay Back Taxes

You can also use Chapter 13 to reduce your tax liability and/or create a payment plan for your tax liabilities. In many cases, Chapter 13 will even eliminate penalties and stop interest from accruing on all or a portion of your tax debt.

How the Process Works

Once a Chapter 13 case is filed, most, if not all, of your creditors are stopped in their tracks. When you file for Chapter 13 bankruptcy (or any other kind of bankruptcy), something called the “automatic stay” goes into effect. The automatic stay immediately stops your creditors from initiating ore continuing collection activity against you or your property. Creditors cannot repossess your car, foreclose on your house, garnish your wages, empty your bank account, or cut off your utilities. If you engage us to file your Chapter 13 cases, we will work with you to prepare a Chapter 13 Plan to reorganize your debts and pay a portion of the amount you owe to creditors. The Chapter 13 Plan, once confirmed by the court, determines the monthly payment and payment period before you complete your case and receive your Chapter 13 discharge.

Approximately 30 days after your Chapter 13 case is filed, you are required to attend a "Meeting of Creditors” presided over by a Chapter 13 Trustee appointed by the court to administer your case. At this meeting, the Trustee and your creditors can ask you questions about your property, your property and your Chapter 13 Plan. However, in most cases, creditors do not attend. The meeting of creditors usually involves you, the Chapter 13 Trustee and an attorney from our firm. If you engage us to represent you in your case, our attorneys prepare you for the meeting and defend you at the meeting.

Once the meeting of creditors is concluded and the trustee has received all information necessary to adequately process your case, the court holds a Chapter 13 Plan Confirmation Hearing presided over by one of the local bankruptcy judges. This is a real hearing held in a real court. This hearing is presided over by a federal Bankruptcy Judge, is scheduled well in advance, and unless your attorney tells you otherwise, you must attend.

At this hearing, the court will decide to confirm or deny your plan to pay your creditors. In most cases, the resolution of the hearing is decided beforehand by consent between the trustee and you. However, it is not uncommon for one or more creditors or the trustee to object to confirmation of your plan. If you retain Fried & Rosefelt, P.A., we will guide you through all aspects of the Chapter 13 process from the filing of your case through confirmation of your plan and completion of your case.

Chapter 13 bankruptcy requires discipline. For the entire length of your case (three to five years), you will have to live within a budget geared to enabling you to meet your Chapter 13 obligations. The majority of debtors do not complete their Chapter 13 repayment plans and do not receive the benefits of their Chapter 13 reorganization and discharge. However, the benefits of completing your plan are substantial, and our attorneys and staff will work diligently with you to create a reasonable plan and help you complete the entire Chapter 13 process.

Payments Under your Chapter 13 Plan

Once you receive confirmation of your Chapter 13 Plan, the bankruptcy court will a wage withholding order requiring that your employer deduct the monthly Chapter 13 Plan Payment from your wages and send it directly to your Chapter 13 Trustee. Automatic payroll deduction has proven to be the best method to help debtors complete their Chapter 13 Plan and receive their Chapter 13 discharge, and wage withholding is required in most areas. However, the court generally does not issue a wage withholding order until after the court has held a hearing and confirms your Chapter 13 plan - generally three to six months after you file your Chapter 1 case. However, if you are self-employed or own your own business, you will usually be responsible for making your own Chapter 13 plan payments directly to the Trustee.

Credit Reporting Issues

A Chapter 13 bankruptcy will stay in your credit file (the internal file kept by credit reporting agencies) for up to ten years from the day you file your papers, but are not usually reported to individual creditors seeking information form the credit reporting agency for more than seven years. Notwithstanding the foregoing, entry of the case on your credit record will usually impact your credit score and our ability to obtain credit for a much shorter period. Chapter 13 plan payments are often reported to the major credit reporting agencies, and a good Chapter 13 payment record will be an important factor in helping you restore your good credit rating and ability to obtain new credits cards, mortgages and car loans at reasonable interest rates.

What to Do if You Need Help

If you live or work in Maryland or the District of Columbia (DC) and have questions about Chapter 13 Bankruptcy, the lawyers at Fried & Rosefelt, P.A. have the knowledge and experience to help you decide whether a Chapter 13 bankruptcy is right for you.
If you have questions about Chapter 13 Bankruptcy, contact us for free consultation. An attorney in our firm will be happy to answer general questions about Bankruptcy or to set up an appointment to meet with you about your particular financial problems. You can set up a FREE 30 minute consultation by calling or filling out our free phone consultation request form.