Daniel C. Cohen is a founding partner of Consumer Attorneys LLP and co-chairs the firm’s Consumer Finance Litigation practice. Mr. Cohen also manages the firm’s client intake and development efforts.
About Chapter 13
When consumers get overwhelmed with debt, they may find that bankruptcy is the best course of action to get back on their feet.
But choosing which type of bankruptcy to file depends greatly on how much the debtor has in the bank and what assets they have at their disposal - and a skilled attorney may be the best asset in charting a course through the storm.
Most debtors - especially those with low incomes and little to no assets - file for bankruptcy under Chapter 7, a relatively simple process that can completely erase certain types of debt.
But debtors with deeper pockets and a number of assets in their portfolios may instead consider filing for Chapter 13 protection, which could provide them with a route to pay off their debts in three to five years while potentially saving their homes from foreclosure.
The team at Consumer Attorneys LLP is here to help consumers if they are staring down the barrel of insurmountable debt and determine if Chapter 13 is their best option to get back into financial solvency.
Is Chapter 13 right for you?
Chapter 13 protection is structured around locking a debtor into a repayment plan to clear up debt, rather than selling off assets to get their bills paid.
In the 12-month period ending on March 31, 2020, 36 percent of the more-than 764,200 individuals and businesses who filed for bankruptcy did so under Chapter 13, according to the latest figures from the Administrative Office of the US Courts.
Debtors are eligible for Chapter 13 relief if their unsecured debts are less than $394,725 and secured debts are less than $1,184,200.
With Chapter 13, a debtor may be able to discharge a variety of debts under their approved plans -- except for certain long-term obligations like home mortgages, student loans, child support and payments for a death or injury caused by drunk or impaired driving.
But Chapter 13 can offer a broader array of dischargeable debt compared with Chapter 7. They may be able to discharge debt from property settlements in divorce proceedings, as well as debts incurred to pay off some tax obligations.
A Chapter 13 filer works with a trustee to come up with a repayment plan that must be approved by a court. A trustee or bankruptcy administrator may also find it prudent for a debtor to successfully pass an approved financial management course.
The debtor must either make regular payments to their trustees or agree to payroll deductions.
If they miss payments, a court could dismiss their case -- or convert it to a liquidation case under Chapter 7, allowing the trustee to sell off the debtor’s nonexempt assets.
A Chapter 13 filer may also put their case at risk for dismissal if they fall behind on child support or alimony payments while their cases are pending.
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