What is a Chapter 13?
Chapter 13 is sometimes referred to as a “wage earner” bankruptcy. Chapter 13 in Ohio is a voluntary plan you enter into to pay your debts, or a portion of your debts, over a 3-5 year period, by making monthly (usually) payments to a Bankruptcy Trustee. The Trustee takes a small fee and then distributes the rest of the money to your creditors.
How much of my debts will I have to repay to my unsecured creditors (such as medical providers and credit card companies)?
It depends. There are a couple factors that determine how much you will have to pay back to your unsecured creditors. The 2 main factors that we have to look at in making this determination are:
1. How much equity do you have in your property that you want to keep?
2. How much money is left over each month after you pay your necessary living expenses?
A Chapter 13 Plan in Ohio can provide for your unsecured debts to be paid back 100%, or down to as low as 0%, depending on the above factors. Only a good bankruptcy attorney can accurately tell you how much you will need to repay your creditors.
When is a Chapter 13 advisable rather than Chapter 7?
There are several situations where a Chapter 13 is typically advisable over a Chapter 7:
1. You are behind on your mortgage or car payment and need time to catch it up.
2. You have decent income, such that your monthly income significantly exceeds your monthly living expenses (in other words, you can pretty easily afford to repay your creditors something).
3. You have a significant amount of non-exempt (unprotectable) equity in assets that you want to keep through your bankruptcy.
4. You have past due taxes that need caught up, and you need some time to be able to do that.
5. You are significantly “upside-down” on a vehicle loan for a vehicle that you purchased more than 910 days prior to your bankruptcy filing. This means that you owe more than the vehicle is worth. Chapter 13 allows you to pay the actual value of the car to the bank, rather than the amount that is currently owing on the loan. This is referred to as a “cram-down.” We also can often lower the interest rate on the car loan in a cram-down.
6. You have more than one mortgage on your home and the first mortgage alone has owing on it more than the current market value of your home.
Can you modify my mortgage on my home loan with a Chapter 13 bankruptcy in Ohio?
Unfortunately, the law currently does not allow for a bankruptcy-induced modification of your home mortgage. We can modify many other types of loans, such as a mortgage for a rental property, but the home mortgage cannot be modified through bankruptcy unless your lender voluntarily agrees to it, which is very rare. Chapter 13 will, however, allow you to catch up arrearages if you have fallen behind on your home mortgage payments.
Is Chapter 13 better on my credit report than a Chapter 7?
The research we have done on this topic has led us to the conclusion that there is no benefit to your credit score in filing a Chapter 13 over a Chapter 7. It certainly is not a factor on which to base your decision as to which chapter to file.
How does Chapter 13 help me if I am behind on my mortgage and want to keep my house?
When you Chapter 13 is filed, the bank is given the opportunity to tell the court how much you are behind on your payments. When we file your Chapter 13 plan, we provide that you will catch that arrearage up over the life of your bankruptcy plan, typically 3-5 years. You will then continue to make your regular mortgage payments, and will make an additional payment to the bankruptcy trustee (your Chapter 13 Plan Payment), who will pay that money to your mortgage company. At the end of your plan, your mortgage should be caught up and current if you have made all of your payments.
Can Chapter 13 get rid of my second mortgage on my home?
Sometimes. If your first mortgage is for more than the current market value of your home, we may be able to “strip off” your second mortgage.
What if I want to file a Chapter 13 but I am behind on child support?
Your Chapter 13 plan must provide for you to make monthly payments that will catch up your arrearages by the end of the plan (typically 3-5 years). You also are required to keep current on your ongoing child support obligations during the Chapter 13 plan.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Requires the following notice:
We are a Debt Relief Agency. We help people file for bankruptcy relief under the Bankruptcy Code. This web site is not an offer to provide bankruptcy assistance services to any assisted person as defined under Section 527(a)(2) of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.