What is Chapter 13?
Chapter 13 is a consumer debt reorganization that enables debtors to repay financial obligations affordably and in one monthly payment over a three- to five-year period. Chapter 13 is an option that is available to help take the control back from your creditors that are foreclosing on your home or repossessing your vehicle that you want to keep. Chapter 13 allows you to repay a portion of your debt through a court-approved repayment plan that you can afford. Once you successfully complete the repayment plan, the remaining eligible debt is discharged. You will also get relief from harassment by creditors, who must stop all collection activity during the term of repayment.
Chapter 13 bankruptcy is often the best choice for homeowners with more equity in secured assets than they can protect with their Ohio bankruptcy exemptions and who wish to keep these assets, or for people whose income is too high to qualify for a Chapter 7 bankruptcy. To file Chapter 13 bankruptcy you must have a regular source of income and have some disposable income to apply toward your Chapter 13 payment plan.
Is Chapter 13 right for you and are you eligible? A free consultation with an experienced and compassionate Ohio bankruptcy attorney at Fesenmyer Cousino Weinzimmer can help you decide.
The Advantages of Chapter 13 Bankruptcy
When you file for Chapter 13 bankruptcy protection, you have the opportunity to repay your debts under better conditions and at lower interest rates. Unlike Chapter 7, which involves liquidation of assets, this process allows you to use future income to repay your creditors and keep your property.
Chapter 13 allows you to consolidate your payments to avoid fees and fines. Debts that may be consolidated include secured loans, such as mortgages and balances on vehicle loans, as well as unsecured debts, such as credit card debt and medical bills. You can repay some or all of your debt affordably over a three- to five-year period. Some loans such as second mortgages or vehicles loans can be avoided or modified in a Chapter 13 plan. Plus, the automatic stay provision of Ohio bankruptcy law means that the phone calls and letters from your creditors will stop during this time. When you successfully complete the court-approved payment plan, the debts covered by the plan are discharged.
One of the most significant benefits of filing for Chapter 13 Bankruptcy is that it gives you the ability to keep your home, valuable non-exempt property (see Ohio exemptions); and other assets. If you have missed payments and are at risk for foreclosure, Chapter 13 gives you a chance to “catch up” and stop a foreclosure to keep your home. It also is an effective way to deal with nondischargeable debts such as student loans and back taxes.
How Chapter 13 Works
Chapter 13 is a repayment plan. If you have a regular source of income and some disposable income, you would choose Chapter 13 when:
- You are behind on your house or car payments.
- Your assets are not exempt.
- Your debts are not dischargeable.
- You have a pending foreclosure.
Under Chapter 13, the U.S. Bankruptcy Code gives you up to five years to repay your creditors. The minimum amount you will have to repay depends on how much you earn, how much you owe and how much your unsecured creditors would have received if you had filed for Chapter 7.
Your repayment plan will be set up and approved by the courts. Unless a creditor files a formal objection to the plan, then all your creditors are bound by the confirmed plan. Under the plan, you will make regular monthly payments to a Chapter 13 Trustee, who then pays the creditors over the period of the plan. The repayment varies from 1% to 100% of what is owed, depending on the factors such as your income, expenses and type of debt. Once you complete all necessary payments, any unpaid balances on dischargeable debts are discharged.
For example, let’s say you owe $6,000 credit card debt. The plan may provide for the repayment at 10% over a period of 60 months. You would pay $10 per month (6,000 ÷ 60) toward that debt. At the end of the plan, the balance of the debt is discharged and you won’t owe any more money.
Under Chapter 13, you can keep your property, so it will stop foreclosure of your home, even if foreclosure has already been filed. If you have missed payments on your mortgage and are threatened with foreclosure, this gives you a chance to make them up. Instead of having to pay the missed payments all at once, you can restart your regular mortgage payment and cover the arrears (the missed payments) in small, affordable payments over the period of three to five years.
Time Is of the Essence
When it comes to debt-relief, the sooner you take action the better, as delaying only gets you deeper in a hole. A free consultation with an experienced and compassionate Ohio bankruptcy attorney at Fesenmyer Cousino Weinzimmer can help you decide what is the best option for your individual situation. Contact us by email or by calling 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati). You will receive valuable, personalized insights on debt relief suitable for your situation, with no further obligation.
Chapter 13 Bankruptcy Review
Tom Fesenmyer and staff have been prompt in returning phone calls and in answering my questions during this five year process with my Chapter 13. I would highly recommend this law firm. I would recommend her to anyone and everyone.” – Jackie Phillips