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Archive for November, 2019

Vehicle Repossession and Chapter 13


Vehicle Repossession

If you have fallen behind on your car payments, then you are at risk for vehicle repossession. Even if you are just one day late making your monthly payment, the car loan company (your lender) has the legal right to repossess your vehicle. Lenders are not under any legal obligation to give you extra time to make your payment. Additionally, if you make a partial payment instead of the full amount owed in a particular month, you are also at risk for vehicle repossession. The unpaid portion is considered late.

Trying to Reach Out to Your Lender

Reaching out to your lender during a time of financial distress is a good idea, but may not always make a difference in regards to the lender repossessing your vehicle. Sometimes a lender will be willing to work with you to come up with a solution to your late payment(s) after you explain your situation. Approaching the lender before your situation spirals out of control is important. If you have recently lost your job, for example, it is best to contact the lender and explain what is going on when this first happens, rather than waiting until you miss several payments.

Consider a Chapter 13

If you are unable to make arrangements with your vehicle lender to catch up the payments, and do not want to risk the lender repossessing your vehicle, a Chapter 13 bankruptcy may be an options for you. A Chapter 13 allows you to pay off the loan during the course of a three to five year plan.

In most circumstances, a Chapter 13 will also obligate your lender to return your vehicle to you if it has already been repossessed. Additionally, under some circumstances, Chapter 13 may allow you to pay back what the vehicle is worth, at a reduced interest rate vs. what you actually owe on the loan. This can oftentimes result in a significant savings.

How is My Credit Score Affected After a Bankruptcy Filing?

Many people who file for bankruptcy already have a low credit score and/or are unable to obtain credit cards or a mortgage. With unpaid bills piling up and possible lawsuits from creditors,  a person’s credit score continues to go down as time goes on.

After filing for bankruptcy, your credit score will lower at first

It is important to know that this is not in any way a permanent situation, and your bankruptcy attorney will advise you on how best to rebuild your credit and increase your score.  Ultimately for the majority of people in a tough financial predicament, filing for bankruptcy will be the better choice than ignoring bills and missing more payments.  

A Chapter 7 bankruptcy filing will remain on your credit report for 10 years. A Chapter 13 bankruptcy filing will remain on your credit report for 7 years.

Given the fact that a credit score can go up quickly once the proper steps are taken, you can begin to rebuild and repair your credit immediately.  

Some ways to quickly and positively impact your credit (once you have filed bankruptcy) include:

  • continuing to make monthly mortgage payments on time (if a Chapter 13 was filed),
  • continuing to make all car payments on time (if you are keeping your car), and
  • paying off any credit cards in full every month (for credit cards obtained after your bankruptcy filing). 

Many credit card companies will offer credit cards to people with a bankruptcy filing because you have either reorganized your debt (Chapter 13) or had your debt discharged (Chapter 7). Therefore, you have less debt than many credit card holders. These credit card companies are more willing to take a risk on you because you have shown that you will be able to make your monthly payments.  

If you file for bankruptcy and then rebuild your credit, you will ultimately have better credit in the long term versus continuing down the path of unpaid bills and getting deeper into debt.  Mortgage lenders and credit card companies are much more willing to approve someone for a loan or a credit card if you have taken positive steps toward improving your situation in a proactive manner.

IF MY HOME IS CURRENTLY IN FORECLOSURE AND I WANT TO KEEP MY HOME, WHICH IS A BETTER OPTION: CHAPTER 7 OR CHAPTER 13

  • November 8, 2019
  • Bankruptcy,Chapter 13,Chapter 7
  • Comments : Comments Off on IF MY HOME IS CURRENTLY IN FORECLOSURE AND I WANT TO KEEP MY HOME, WHICH IS A BETTER OPTION: CHAPTER 7 OR CHAPTER 13

Make sure you have all the bankruptcy information

As a debtor filing for bankruptcy, you are entitled by law to a court-ordered rule of protection known as the automatic stay. This applies in a Chapter 7 and in a Chapter 13 filing. There are several creditor activities that the automatic stay protects and/or prohibits. One of the prohibited acts involves any creditor continuing a foreclosure sale that has begun prior to the bankruptcy filing, or starting a foreclosure proceeding during the length of the bankruptcy case. If you want to file for bankruptcy and keep your home, there are certain requirements that must be met. A qualified attorney will look at your situation in detail to determine whether you meet the requirements.

See Chapter 7 vs Chapter 13

In a Chapter 7 filing, a debtor can buy some time for him/herself with the automatic stay by preventing immediate foreclosure on a debt secured by real estate. If there is a scheduled foreclosure sale, this sale gets cancelled. It is very important to note: the debt that is allowed to be wiped out in a Chapter 7 does not include missed mortgage payments. Once the debtor in a Chapter 7 receives a discharge at the resolution of his/her case, then the automatic stay is lifted. At this time, the creditor can resume or begin foreclosure proceedings against a debtor who has missed mortgage payments prior to filing the Chapter 7. The creditor can also seek relief from the automatic stay prior to your Chapter 7 discharge. Chapter 7 bankruptcy does not allow a debtor to “catch up” overdue mortgage payments within his/her case. Additionally, there is no requirement for the bankruptcy court to work out any repayment plan with the lender. Lenders are not required to modify a mortgage if you file a Chapter 7.

One important thing to consider regarding Chapter 7 is that money may be freed up for you once all allowable debts are consolidated into a Chapter 7 plan. This can, in some circumstances, allow a debtor to pay the lender all of the missed payments owed. Then the debtor must continue to keep the mortgage current and pay the monthly mortgage, both during the Chapter 7 proceeding and after the discharge.

Usually, the better option if you want to keep your home is to file a Chapter 13 bankruptcy. This is a reorganization of your debts, which is a 3-5 year repayment plan on debt owed. Missed mortgage payments do qualify to be part of this repayment plan. This means that you can “catch up” on all overdue mortgage payments, and also not have to pay them all at once. Through a Chapter 13 plan, monthly payments are made to a Chapter 13 Trustee who oversees the case. The debtor must continue to make all ongoing mortgage payments during the entirety of the Chapter 13 case. At the end of the Chapter 13 case (the 3-5 year period), the debtor receives a discharge on all debts that were part of this plan. The debtor keeps his/her home and continues to pay the monthly mortgage payment.

New Chapter 11 Bankruptcy Law

WHAT IF I AM OVER THE DEBT LIMIT IN ORDER TO FILE FOR A CHAPTER 13 BANKRUPTCY?

A Chapter 13 Bankruptcy allows individuals to pay all or a portion of their secured and unsecured debts through a U.S. Trustee-approved plan, totaling 3-5 years. After the payment plan is finished, the debtor receives a discharge of all remaining debt that was part of the plan.

As of 2019, the debt limit for an individual to file for a Chapter 13 is $419,275.00 for secured debts and $1,257,850 for secured debts.

What Happens if My Debt Exceeds the Current Limit?

If your debts exceed the current limits, then you may have the option of filing a Chapter 11 bankruptcy under a newly created law in October of 2019. This new law allows a debtor to be treated as a small business. The total debt to be repaid must not exceed $2.75 million. This is a 3-5 year repayment plan, similar to a Chapter 13 repayment plan. Speak with bankruptcy attorney Matthew Cherney to see if this new subchapter of Chapter 11 bankruptcy would apply in your situation.