A Chapter 13 bankruptcy is an interest-free debt consolidation and repayment plan for people who can pay off their debts over 3 to 5 years. Chapter 13 is the only option available for those who earn more than the median family income for their state and can't otherwise pass the means test requirement of Chapter 7.
The key difference between Chapter 7 and Chapter 13 is that under Chapter 13, the debtor is the one that normally remains in possession of any property of the bankruptcy estate and makes payments to the trustee throughout the life of the payment plan.
If the debtor's current monthly income is less than the Florida state median, then the payment plan to the trustee will typically be for three years. If the current monthly income is more than the state median, the payment plan will spread over five years. The payment amounts are based on the debtor's anticipated disposable income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. While the plan is in effect, the automatic stay protection of the bankruptcy code is in effect protecting the debtor from lawsuits and other collection actions. While you're on a payment plan, your creditors cannot continue any collection efforts against you.
In a Chapter 13 bankruptcy, a trustee is appointed to your case and their primary role is to collect the monthly payments that you make under your plan and distribute to creditors. The amount you pay your creditors may be as little as 10 cents on the dollar. You are eligible for a discharge once the plan is complete.
To qualify for a Chapter 13, you must have a regular income and not have more than the $922,975 in secured debt or more than $307,675 in unsecured debt.
Chapter 13 may allow you to eliminate a HELOC or second mortgage.
If your home is worth less than what is owed on your first mortgage, then you may be able to "strip" it in a Chapter 13 bankruptcy. When a home equity line of credit is stripped, it changes from "secured creditor" status to "unsecured creditor" status. That means that the entire amount that you owe will then be discharged at the end of your payment plan along with the other unsecured creditors (credit cards, etc.) and you no longer owe the money on the second mortgage. At the Law Offices of Camille Sebreth PLLC, we will take all appropriate steps to help our clients eliminate second mortgages.
Reduced Payments to a Budget
A Chapter 13 bankruptcy is based on repaying a portion of your debt through one monthly payment to the trustee over a three to five-year period. The trustee then sends each creditor a portion towards the money they are owed. The monthly payment amount is arrived at by figuring out how much disposable income is left monthly after your living expenses are accounted for. Even though you are paying back a portion of the debt, it is usually much less than what you owed.
Minimal Appearances in Court
Most people are intimidated by the thought of having to appear in court. As in a Chapter 7 Bankruptcy, there is only one Chapter 13 mandatory meeting called a "341 meeting" in front of your trustee and any creditors that show up for the meeting. No one will be allowed to harass or intimidate you and you will be treated with respect and dignity at all times. It's a quick meeting that usually last ten to fifteen minutes. Attorney Camille Sebreth will be with you at all times during this meeting representing your interests to the court.
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