I am often questioned as a Fox Lake bankruptcy attorney, just what is Chapter 13 bankruptcy? Chapter 13 bankruptcy is reorganization under the Bankruptcy Code. Chapter 13 allows an individual to repay mortgage arrears over a three-to-five-year period. Chapter 13 bankruptcy also allows an individual to reorganize an auto payment as well as all other debt. While a debtor is in a Chapter 13 bankruptcy case, creditors are prohibited from taking collection actions against the debtor. Thus, a mortgage foreclosure action will stop dead in its tracks while the Chapter 13 is pending. A finance company for a vehicle will not be able to repossess a vehicle while the debtor is in a Chapter 13 repayment plan, and all other creditors are stayed from collection efforts while the Chapter 13 case is active and pending. You can get this relief through the help of a local bankruptcy lawyer.
Chapter 13 is a complicated case in that there is a lot of math and a lot of paperwork that has to be prepared by your Chapter 13 bankruptcy attorney. Your Chapter 13 bankruptcy attorney is going to set up a meeting or an initial consultation with you to learn all about your income, your expenses, your assets, and your liabilities. At that meeting, the Chapter 13 bankruptcy attorney is going to determine whether or not a Chapter 13 bankruptcy case is going to be successful for you. If not, you can explore one of the other types of bankruptcy.
Not everyone can file a Chapter 13 bankruptcy case. In order to have a successful Chapter 13 bankruptcy case, you must have disposable income above and beyond your reasonable expenses. If you do not have the ability to repay a portion of your debt over the next three to five years, your case will be dismissed or never even recommended for confirmation by the Chapter 13 bankruptcy trustee.
The most common use of a Chapter 13 is to stop a foreclosure sale and halt a foreclosure process. Let me give you the scenario of a typical client who wants to file a Chapter 13 bankruptcy. The typical client is a homeowner who has fallen behind anywhere from 6 to 12 months on their mortgage payments. Since the client has fallen behind, the mortgage company is not willing to accept any payments other than a full payment to get completely caught up. The client does not have the ability to make that one lump-sum payment to get caught up, but the client does have the ability to start making the regular mortgage payment again, plus put something away towards the part he fell behind. Since the mortgage company is not willing to work with the debtor, the debtor has to avail himself of Chapter 13 of the Bankruptcy Code, which mandates that the creditor must start to accept regular monthly payments as long as the debtor is making the trustee payment as well. This is some of the relief that you can acquire when you file bankruptcy.