Chapter 13 “reorganization” or “consolidation” allows you to consolidate your debts into one low monthly payment. The payment amount is tailored to your disposable income after your household expenses are paid. Chapter 13 is technically a bankruptcy, but is viewed differently since it is not a “straight” bankruptcy that simply eliminates debts without any payments whatsoever. Instead, it consolidates all missed mortgage payments (“arrears”), taxes, car payments, and other secured and unsecured debts and spreads the repayment over a three to five year period.
If you are trying to save your home, the net result for your mortgage would be that it is legally reinstated by Federal Court Order, and you continue to make your normal mortgage payments on an ongoing basis. As for other unsecured debts that were included in the bankruptcy, they will be discharged even if you only paid a small percentage of what may have been owed.
If you owe taxes, Chapter 13 can stop the interest and penalties and allow you to pay the amount owed on the date of filing over the three to five year period.
For example, if you owe $9,000 in arrears on your mortgage, your Chapter 13 payment would be approximately $150 per month (60 months X $150 = $9,000). Note: There would also be a small fee to pay to the Chapter 13 Trustee along with the $150.
Each situation is different, which is why it's important to review your case thoroughly with a bankruptcy attorney. You need to make an informed decision as to which type of bankruptcy is right for you.
For more information about your case, contact Nathan A. Berneman, Esq. to schedule an appointment for a free consultation.