How to Redeem Property in Chapter 13? [Comprehensive Answer] - CGAA (2024)

FAQs

Can you pay off your house in Chapter 13? ›

By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time.

There are three different types of bankruptcy proceedings: Chapter 7, Chapter 11, and Chapter 13. A Chapter 13 bankruptcy is unique because it offers debtors an opportunity to maintain possession of their assets while developing a repayment plan.

A: Balance on hand is the amount of money that the Chapter 13 trustee has collected but has not yet distributed to your creditors.

You Get To Keep All Your Assets In Chapter 13

In Chapter 13 you get to keep all your assets. The debtor filing the Chapter 13 case remains in possession of all property. In return, you must pay your creditors: all your disposable income (income left over after you've paid all your normal living expenses), and.

In Chapter 13 bankruptcy, 401(k) or other voluntary retirement contributions reduce the amount creditors receive through your repayment plan, so most jurisdictions don't allow them. Some, however, might approve contributions if you're approaching retirement age and the contributions are reasonable and necessary.

With Chapter 13, FHA and VA loan borrowers may be able to refinance while they're still in bankruptcy, after they've made a year of on-time payments according to their repayment plan. On conventional loans, you'll need to wait 2 years after Chapter 13 discharge to qualify for a loan.

The appointed trustee will collect and take control of a debtor's non-exempt assets, liquidate them, and distribute the proceeds to creditors.

Unlike a chapter 7 liquidation, a chapter 13 plan generally uses the debtor's income rather than assets to pay various creditors. And unlike a liquidation under chapter 7, a chapter 13 plan allows a debtor to retain the collateral for the claims of creditors and pay off long-term debts, such as a mortgage for a home.

Generally, you cannot sell, refinance, gift or dispose of any of your property during your Chapter 13 case without the approval of the Bankruptcy Judge. This includes your house, car, appliances, furniture, jewelry, etc. Whether the property was acquired before or after you filed your case does not matter.

Once you have paid off all of your chapter 13 bankruptcy debts, you will go to the bankruptcy court for one last hearing — your discharge hearing. You have the option of directing your attorney to attend the hearing in your place. The bankruptcy judge will review all of your case details.

What debts Cannot be discharged in Chapter 13? ›

No matter which form of bankruptcy is sought, not all debt can be wiped out through a bankruptcy case. Taxes, spousal support, child support, alimony, and government-funded or backed student loans are some types of debt you will not be able to discharge in bankruptcy.

Ending Your Plan Early

There are only two ways to pay off a Chapter 13 bankruptcy early: pay 100% of the allowed claims filed in your case, or. qualify for a hardship discharge.

If you filed for bankruptcy to avoid foreclosure or are behind in house payments, your Chapter 13 plan payment could be more or less $1500 per month. Additionally, high income, high debt Chapter 13 filers would usually be required to make payments between $2000 and $3000, or even more.

In most cases, failure is due to one of several reasons: Life circ*mstances. Not having the guidance of an experienced bankruptcy attorney. Over-ambition.

The Monthly Payment Amount Depends on Your Unique Situation

In some cases, the average payment for a Chapter 13 case ranges from $500 to $600 per month. If you have several different low payment amounts and not a significant amount of income, you will be paying a lower amount per month.

Also do not not incur debt, use credit, credit cards, or enter into leases while in Chapter 13 without Bankruptcy Court approval, except in the case of an emergency for the protection and preservation of life, health or property. Contact your attorney if you need to sell property or incur debt.

As your trustee will have the authority to make your mandated secured loan payments throughout the duration of your bankruptcy and will have access to all of your financial information and bank accounts.

CHAPTER 13 BANKRUPTCY

If you have a month where you receive an unexpected lump sum or windfall, you must pay the lump sum in to the bankruptcy as well. Just like in Chapter 7 Bankruptcy, however, you get to keep whatever you win after the creditors are paid off.

Any credit purchase you make without Court approval could be prohibited, what was purchased might have to be returned and you very likely would lose any payment you made. Requests to borrow may be made to the Chapter 13 Trustee using a form that you can obtain from your attorney.

There is good news for California homeowners who are considering filing for bankruptcy protection. A new state law raises the homestead exemption — the amount of home equity that can be shielded from creditors in a Chapter 7 or Chapter 13 — to a minimum of $300,000 and a maximum of $600,000.

What happens to mortgage after Chapter 13 discharge? ›

Unlike other debts, your mortgage payments will not be discharged after you complete your payment plan. In other words, you'll have to keep paying your mortgage in order to keep your home after you've completed your chapter 13 obligations.

About 45 days after you've received your discharge, you will receive a document called a Final Decree. It's the document that officially closes your case. Once this document is received, you are no longer in bankruptcy.

Your trustee only has control of your estate until the bankruptcy is complete. However, if something was in progress during your bankruptcy and you don't collect the money until later, your trustee could still gain access to it.

Anything that isn't protected in bankruptcy is considered non-exempt and, in Chapter 7, can be sold by the trustee to pay off creditors. In a Chapter 13 bankruptcy, the value of non-exempt property is used to determine how much the filer will have to pay creditors whose debt isn't guaranteed by collateral.

Debt collectors cannot try to collect on debts that were discharged in bankruptcy. Also, if you file for bankruptcy, debt collectors are not allowed to continue collection activities while the bankruptcy case is pending in court.

What Is a Chapter 13 Hardship Discharge? A hardship discharge is a discharge the court grants you before you complete all of the required payments under your Chapter 13 repayment plan.

Although a Chapter 13 bankruptcy stays on your record for years, missed debt payments, defaults, repossessions, and lawsuits will also hurt your credit and may be more complicated to explain to a future lender than bankruptcy.

Can a Bankruptcy Trustee Take Your Tax Refund After a Discharge? There are two types of bankruptcy for individuals, Chapter 7 and Chapter 13. The bankruptcy trustee can keep your tax refund in both, though with Chapter 7 it will happen only once. With Chapter 13, it can happen every year of your repayment plan.

Unlike chapter 7, creditors do not have standing to object to the discharge of a chapter 12 or chapter 13 debtor. Creditors can object to confirmation of the repayment plan, but cannot object to the discharge if the debtor has completed making plan payments.

If you are planning to file bankruptcy or have already done so, you may be wondering what will be considered an asset. An asset is anything of value that you own, including real estate, motor vehicles, bank accounts, investment accounts, furniture, jewelry, firearms, cash, books, stocks, pets and collectibles.

How long does it take to clear Chapter 13? ›

Chapter 13 bankruptcy typically takes three to five years. During that time, you'll be on a repayment plan to repay some or a portion of your debts. There are a few factors that will determine how long your Chapter 13 repayment plan will last, including your income.

Overview. A Notice of Final Cure Mortgage Payment is filed by the trustee within 30 days of the date the debtor completes all payments under the plan. The purpose of the notice is to state whether the debtor has paid the full amount required to cure the mortgage default.

Types of debt that cannot be discharged in bankruptcy include alimony, child support, and certain unpaid taxes. Other types of debt that cannot be alleviated in bankruptcy include debts for willful and malicious injury to another person or property.

In order for the payment plan to be approved by the court in Chapter 13, it must meet certain criteria. Firstly, all Chapter 13 payment plans must repay all priority claims and administrative expenses in full. These types of debts include taxes, child support, alimony, attorneys' fees and court costs.

Key Takeaways. If a company goes into liquidation, all of its assets are distributed to its creditors based on a pre-determined priority order. Secured creditors are first in line, as their claims over assets are often secured by collateral and a contract.

When you get an early discharge from a chapter 13 bankruptcy plan, it either means you couldn't make the required payments due to an unexpected hardship or you were able to pay off your debts in full. Either way, the discharge allows you to be freed of your debts.

Consequences of Dismissing Your Chapter 13 Bankruptcy

However, you will lose your “automatic stay” that prevents creditors and collection agencies from contacting you. Accordingly, your creditors may once again seek to repossess your property or foreclose on any collateral that serves to satisfy your debts.

A hardship discharge is intended to be used as an instrument to alleviate personal hardship encountered by an enlisted member's immediate family when discharge is the only solution. It will not be used as a means to rid the Service of a burden to the command.

In Chapter 13 bankruptcy, you must devote all of your "disposable income" to the repayment of your debts over the life of your Chapter 13 plan. Your disposable income first goes to your secured and priority creditors. Your unsecured creditors share any remaining amount.

The majority of debts discharged in Chapter 13 bankruptcy are nonpriority unsecured debts. Credit card balances, personal loans, medical bills, and utility payments fit here.

How to estimate Chapter 13 payment? ›

To calculate the total average monthly payment, add all amounts that are contractually due to each secured creditor in the 60 months after you file for bankruptcy. Then divide by 60.

You don't have to pay unsecured debts in full. Instead, you pay all your disposable income toward the debt during your three-year or five-year repayment plan. The unsecured creditors must receive as much as they would have if you'd filed Chapter 7.

Filing for bankruptcy in any form will have an adverse impact on your credit rating for as long as it appears on your credit report. However, filing under Chapter 13 if you have the ability to reorganize your finances may cause less damage than filing under Chapter 7 and allow you to regroup faster.

The Minimum Percentage of Debt Repayments In A Chapter 13 Bankruptcy Is 8 To 10 Percent.

Changing jobs is one of the most common reasons for a bankruptcy plan payment increase. Moving on to a higher-paying career or position usually means that the debtor's income increases. Along with raises or promotions to higher paying jobs, the court may also view consistent overtime as a source of additional income.

At the same time, very few bankruptcy trustees are going to file a motion to dismiss against you over a single late payment. As a general rule, it takes two or three missed payments before action is taken to default a Chapter 13 bankruptcy plan. Still, you cannot guarantee that you will have that much time to act.

Often, those individuals or married couples can still file for Chapter 13 bankruptcy, but will be required to pay 100% of their unsecured debts through the plan. If you're wondering why you would bother to file Chapter 13 if you're going to have to pay all of your debts anyway, you're not alone.

Unlike other debts, your mortgage payments will not be discharged after you complete your payment plan. In other words, you'll have to keep paying your mortgage in order to keep your home after you've completed your chapter 13 obligations.

You will likely have to default on the loan before the lender takes such an action, but if you don't reaffirm, you'll live in a legal gray area. Your lender can take your home even if you make all your payments, as you are no longer obligated under the terms of the promissory note.

Reaffirming a mortgage debt requires a comprehensive multi-page reaffirmation agreement that must be filed with the court. The reaffirmation agreement also requires the debtor's bankruptcy attorney to indicate that he or she has read the agreement and that it does not impose any undue hardship on the client.

What happens to your bank account when you file Chapter 13? ›

Your Rights Over The Funds In Your Bank Account

As long as you leave enough funds in your chosen account for your trustee to pay your scheduled loan repayments, on time, you will be able to use the rest of the money which you earn in any way you choose.

If your Chapter 13 plan payment is too high, you can sometimes get it lowered if you encounter a reduction in household income. If your income reduces, you are many times also allowed to reduce your plan payment. This is accomplished usually by filing a Motion to Modify your Chapter 13 plan.

The Minimum Percentage of Debt Repayments In A Chapter 13 Bankruptcy Is 8 To 10 Percent.

Tax obligations while filing Chapter 13 bankruptcy:

Taxpayers must file all required tax returns for tax periods ending within four years of their bankruptcy filing. During a bankruptcy taxpayers must continue to file, or get an extension of time to file, all required returns.