Answers to Frequently Asked Questions About Chapter 13
The most frequent reason for filing a Chapter 13 Petition is to allow a homeowner to avoid foreclosure and the loss of their home. If a homeowner can resume making their regular monthly mortgage payments, property taxes and insurance and make up the arrears on their mortgage over a period of 36 to 60 months, foreclosure can be prevented.
Example – John and Mary are a married couple who bought a home when both were working, They are six months behind on their mortgage payments of $2,000.00 per month because John lost his job. John has found a new job and they can now resume making their mortgage payment. They cannot pay the arrears on their mortgage and the $30,000.00, they owe on their credit cards because John’s new job pays less then he previously earned and they have no savings left.
John and Mary file a Chapter 13 Petition and Plan which provides that they will begin making their regular monthly mortgage payments and will repay the arrears on the mortgage by making payments of $200.00 per month for 60 months. They will also pay ten percent of their credit card debt $3,000.00, by make a monthly payment of $50.00 per month for 60 months and discharge $27,000.00, ninety percent of the debt. The payments they are required to make on their mortgage arrears and their credit card debt will be paid by them each month to the Chapter 13 United States Bankruptcy Trustee. They must also pay the Trustee ten percent of the amount they are repaying on the mortgage and credit cards. Therefore their the payment they must make each month to the Trustee is $275.00.
If John and Mary make their mortgage payments and payments to the Trustee each month, they will be current on their mortgage and 90 percent of their credit card debt $27,000.00 will be wiped out (discharged), and they will have cleaned the slate and earned a Fresh Start.
*Caution: One Size Does Not Fit All Determining whether you qualify for Chapter 13, and if it would be in your interest to file a Chapter 13 Petition and Plan can only be determined after a review by an attorney of your income, assets, liabilities and current circumstances.