Posted on August 04, 2017 in Chapter 13

If protecting your co-debtor from having to pay your debt is a high priority, Chapter 13 has a remarkable tool for doing that.

Chapter 7 Doesn’t Always Help

Our last blog post was about helping your co-signer through a Chapter 7 “straight bankruptcy” case. You discharge (legally write off) most or all your other debts. Then you may be able to afford to make payments on your co-signed debt.

But that doesn’t always work. What if:

• discharging your other debts still does not leave you enough money to make the monthly payments on the co-signed debt?
• you have other debts that you would continue to owe after a Chapter 7 bankruptcy—recent taxes, child support arrearage, non-support divorce debt, student loans—leaving you unable to pay your co-signed debt?
• you are behind on the co-signed debt and can’t afford to catch up on the missed payments right away?

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 Posted on August 02, 2017 in Bankruptcy

Don’t be afraid to file bankruptcy because of how it would affect a co-signer. Your bankruptcy often actually helps that co-signer.

Practical Protection for Your Co-Signer

You may not want to file bankruptcy because you don’t want to hurt a co-signer. You may not want to write off your obligation on the debt and leave your co-signer owing it alone.

If so you’ll be relieved to hear that by filing bankruptcy you can often get both financial relief for yourself and the best practical protection for your co-signer.

Today we’ll show how filing a Chapter 7 “straight bankruptcy” case could provide that relief and that protection. Next time we’ll show how a Chapter 13 “adjustment of debts” case could protect your co-signer when Chapter 7 cannot.

Assumptions

We’re making a couple assumptions here:

• Between you and your co-signer, you were the one who benefitted from the co-signed credit. (You co-signer was helping you out, not the other way around.)

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 Posted on July 31, 2017 in Secured Debts

How Chapter 13 helps you keep personal property collateral on a debt (such as furniture bought on credit) for less money through cramdown.

Last time we explained how you may be able to reduce the monthly payments, interest, and overall cost of a vehicle loan through Chapter 13 cramdown. The debt must be at least 910 days (two and a half years) old. Plus the more the vehicle is worth less than the amount owed the greater the likely savings. (See the “hanging paragraph” after the end of Section 1325(a)(9) of the U.S. Bankruptcy Code.)

This cramdown—the re-writing of loan terms—also applies to debts secured by personal property collateral other than vehicles. The debt must be at least 1 year old when you file the Chapter 13 case to do the cramdown. Here’s an example to show how this works.

Creditor Leverage under Chapter 7

Jason and Mary bought a set of bedroom furniture for their 13 and 16 year old daughters 18 months ago. They bought it on credit, and owe $3,800 on the debt. They owe so much because they could make no payments for the first year. With the wear and tear on the furniture it now has a fair market value of about $1,200.

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 Posted on July 28, 2017 in Chapter 13

Chapter 13 vehicle loan cramdown solves a number of serious practical problems that even Chapter 7 “straight bankruptcy” can’t.

Chapter 13 REALLY Helps with Vehicle Loans

If you want to keep a vehicle with a debt against it, Chapter 13 can really help.

It’s almost as if the more worse off you are with this kind of debt, the more Chapter 13 can help:

• If you’re behind on payments, you’ll be given a long time to catch up, and may not even need to
• If the car or truck is not worth as much as you owe, “cramdown” can lower your monthly payments, the interest rate, and reduce the total amount you pay for it
• If you fall behind later, you’re protected from repossession

Chapter 13 also generally allows you to favor your vehicle loan above most other debts.

Today we’ll show you how this works with a hypothetical example.

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 Posted on July 26, 2017 in Chapter 13

The laws about the treatment of different types of creditors can often be used in your favor to pay who you want or need to pay.

Your Chapter 13 payment plan has to treat debts that are legally the same type of debts essentially the same way. But your plan can and must treat different types of debts quite differently. The laws related to this can be used to your advantage in many, many ways. Today we begin showing how this works with each of the three major types of debts.

Secured Debts

A secured debt is one which is legally tied to something you own. The secured creditor has rights against that property you own. Those rights usually include to repossess or foreclose on the property if you don’t pay the debt.

For example, your home mortgage(s), unpaid property taxes, judgments with liens on your home, income tax liens can all be debts secured against your home. And your vehicle loan is secured against your vehicle.

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 Posted on July 24, 2017 in Bankruptcy Procedure

Chapter 13 revolves around your payment plan, which you propose based on your budget, and possibly negotiate with creditors and the trustee.

In our last two blog posts we introduced Chapter 13 “adjustment of debts” bankruptcy. We explained how to qualify for it and how it can buy you extremely valuable time. Today we get to the heart of this option: the Chapter 13 payment plan.

The Length of the Plan

A Chapter 13 case almost always requires a 3-to-5-year payment plan. That may sound like a long time, but the length itself is often an advantage. That’s because your Chapter 13 plan often has you paying special debts that you want or need to pay, and the more time you have the less you have to pay each month. That makes achieving your plan goals easier and more realistic.

Whether a plan has to be at least 3 years long vs. 5 years depends on two main factors. First, your income plays a major role. Without explaining this in detail here, relatively lower income results in a minimum 3-year plan. Higher income results in a 5-year plan.

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 Posted on July 21, 2017 in Chapter 13

Chapter 13 is very different from Chapter 7 “straight bankruptcy.” It buys you time to deal effectively with your special debts.

The Main Overall Benefit of Chapter 13

The main benefit of Chapter 7 “straight bankruptcy” is the discharge—legal write off—of your debts.

You also get a discharge in Chapter 13 “adjustment of debts.” But a more immediate and often more important benefit is that you’re protected from collection action by creditors while you pay all or a portion of certain special debts. Those special debts are usually ones that Chapter 7 does not discharge, or does not help in a meaningful way.

Buying Time

Here are some examples of the kinds of debts that buying time under Chapter 13 helps you with.

• Home Mortgage: If you’re behind on your first mortgage Chapter 13, can give you as much as 5 years to catch up. An ongoing foreclosure is stopped. Future ones can be prevented. This buying of time gives you a much more practical way to save your home. And a much more peaceful one.

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 Posted on July 19, 2017 in Chapter 13

You can file a Chapter 13 case if you are an “individual,” have “regular income,” and don’t owe too much.

If you qualify, a Chapter 13 case is an extraordinarily powerful tool for dealing with certain kinds of debts. For example:

• vehicle loan cramdown may allow you to significantly lower your monthly vehicle loan payments, not have to catch up on any late payments, and reduce how much you pay overall for your vehicle

• catch up on child and spousal support arrearage based on what you can afford, stopping support enforcement against your wages and accounts and against your driver’s or occupational licenses
• pay newer income tax debts over time—as long as 5 years—usually without any accruing interest and penalties
• strip your second mortgage from your home’s title in some situations, permanently ending those monthly payments, reducing the debt against your home

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 Posted on July 17, 2017 in Vehicle Loans

If your vehicle is worth less than you owe on it, under Chapter 7 you can keep it by “redeeming” it—paying its present value in full.

If you want to keep your vehicle in a Chapter 7 “straight bankruptcy,” your main options are “reaffirmation” and “redemption.”

Reaffirmation is much more common. It involves entering into a formal agreement to repay the loan as if you had not filed bankruptcy. You’re recommitting to pay the loan, “reaffirming” that you want to pay it. We covered reaffirmation a couple blog posts ago.

Redemption is much less common, especially in certain areas of the country. But in the right circumstances it can save you lots of money.

What is Redemption?

In a couple respects redemption is the opposite of reaffirmation.

Instead of-promising to pay the vehicle loan in spite of your bankruptcy, with redemption you are getting rid of that loan.

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 Posted on July 14, 2017 in Vehicle Loans

If you’re buying a vehicle, sometimes getting out of the contract is your best option. Chapter 7 lets you do that, owing nothing.

“Reaffirming” Your Vehicle Loan

Our last blog post was about keeping your vehicle in a Chapter 7 “straight bankruptcy” by reaffirming the vehicle loan. If you are current on the loan/lease and can afford the payments after bankruptcy, reaffirming may make sense.

But sometimes it isn’t your best option. Bankruptcy also gives you an extraordinary opportunity to get out of your vehicle contract and its debt.

Even if you think you should keep your vehicle, consider the advantages of surrendering your vehicle during a Chapter 7 case.

Your Opportunity to Escape the Debt on the Vehicle Loan

Consider 3 scenarios:

1. You may regret having made the purchase. You might have been talked into it by a pushy salesperson. You may have been surprised when you qualified for the credit and figured that you should grab the opportunity. But you’ve known for a while that it was a mistake. Bankruptcy is your chance to undo the mistake.

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