Things rarely go wrong to the point of failure when you hire a Dixmoor bankruptcy lawyer. When you claim bankruptcy under Chapter 13, almost every problem in Chapter 13 can be fixed by increasing the plan payment and paying more money to creditors. Whether the debtor can afford those increases is a separate issue entirely. The only issue that cannot be corrected through the plan is if the debtors are either not making or cannot afford their trustee or mortgage payments.
Typical problems in Chapter 13 include the following:
- The scheduled amount of debt is too low. This issue is especially prevalent in cases involving mortgage arrears. The proper solution is to increase the disbursement to those creditors and to increase the debtor’s plan payment.
- Repetitive filings. Chapter 13 is a great tool for helping debtors reorganize. Debtors can also use it delay and hinder their creditors. In those abusive circumstances, a case can be dismissed with a bar on refiling – which means that a debtor cannot file for bankruptcy protection within that time period. In extremely abusive cases, a bankruptcy case can be dismissed with prejudice, which means the debtor can never file bankruptcy ever again.
- Trustee objections. The bankruptcy trustee can object for a variety of reasons, including bad faith, expenses being too high, and feasibility. Most of these issues can be overcome by raising the plan payment or providing more information to the trustee.
- A debtor fails to make mortgage payments outside the bankruptcy. This failure will generally result in a motion to modify stay by the creditor. If granted, the creditor would then be free to resume regular collection efforts, which may include foreclosure. If a bankruptcy plan calls for disbursement of mortgage arrears in the plan, the trustee will generally stop making those disbursements. The removal of the mortgage arrears will either cause the plan to end earlier or result in the remaining creditors receiving more money.
- Make sure that you seek Illinois bankruptcy advice if you live in Illinois and are considering filing for bankruptcy relief
Liens can sometimes be stripped in Chapter 13 bankruptcy cases. The most common adversary proceeding in a Chapter 13 is a lien-stripping adversary. If a junior mortgage is completely unsecured, such that the value of the property is less than or equal to the value of the collateral, the junior lien can be stripped off the property through an adversary. If successful, the junior lien is paid with the unsecured creditors. At the end of the bankruptcy, the discharge order would cause the lien to be avoided and released by the creditor. Remember, the case must complete for the lien to actually be fully stripped. As always, bankruptcy should be a last option and you should consider your alternatives to bankruptcy prior to filing.