Chapter 13

Using Chapter 13 To Repay Your Debt

For those Maryland or Washington, D.C., residents who do not qualify for Chapter 7 bankruptcy, Chapter 13 may be an option. Typically called a “wage earner’s plan,” Chapter 13 allows debtors to repay their debts based on their current incomes.

The debtor in this situation may present to creditors a plan to repay a portion or all of their debt based on their disposable income and net worth. This installment plan can last for 36 months and up to 60 months (five years). For those who are facing bankruptcy, the courts will generally allow you to wrap your past-due mortgage and car payments into the plan.

Why you might want to file bankruptcy:

  • Your current income and assets exceed exemptions and expenses
  • You want to get on track with mortgage payments and unsecured debt
  • You want to get on track with car payments

Advantages of filing Chapter 13 include:

  • It stops foreclosure and repossession.
  • It pays back some or all debt over a period of time.
  • It sets up repayment based on income and net worth.
  • It shows up on your credit report for less time than Chapter 7 does.
  • There is zero contact between debtors and creditors throughout the plan.
  • It protects liable third parties.
  • It wipes out second mortgages, tax liens and judgment liens (in certain cases).
  • It surrenders negative equity when purchasing a new car.
  • It reduces the amount owed on a car and other personal property (in certain cases).
  • It wipes clear dischargeable debts.

Debtors make a single payment monthly directly to the Chapter 13 trustee assigned to their case. The trustee, in turn, uses these monthly payments to satisfy the debtor’s past-due accounts. Once the past-due accounts are current, the trustee will then use the monthly payments to pay some of the unsecured debt. Debtors may complete their Chapter 13 plan in less than three to five years, in certain cases.

For those who are facing mounting problems with adjustable-rate mortgages, have overextended their credit or have recently returned to the workforce, Chapter 13 may allow them to get back on their feet financially.

Looking For Effective Debt Solutions? Contact Us Today

At Morris Margulies, we can help you determine if Chapter 13 is the right solution to your current financial problems. If you are a resident of Maryland or Washington, D.C., and you wish to explore your bankruptcy options, contact us online or call 301-816-1600 to reach a legal professional on our team.