Why should I file Chapter 13 instead of Chapter 7 bankruptcy?
If you are a few months late on your mortgage, or a few months late on your car payment and want to keep both your house and your car, you can file Chapter 13 to allow you to pay these late payments over an extended period of time instead of within only a few months as required in Chapter 7.
- No Interest & Penalties on IRS back taxes during Chapter 13
- Another major benefit of Chapter 13 is if you owe large IRS back taxes that are less than 3 years old (i.e. non-dischargeable in bankruptcy), during your 3-5 year bankruptcy plan, the IRS cannot charge you interest and penalties. As such, all of your payments go directly to the principal of your taxes that are due instead of the 8-12% or more that you would pay if you were in a repayment plan with the IRS that could take you 5-10 years, which might only take 3-5 years in bankruptcy.
- You may be able to “Strip Off” your 2nd and 3rd mortgage or home equity loans
- If the value of your home has fallen such that your 1st mortgage is more than your home is worth, we may be able to convert your 2nd mortgage, 3rd mortgage, and/or any home equity loans or home equity lines of credit (HELOC) to an unsecured loan – i.e. just like a regular credit card. By doing so, you can completely get rid of your 2nd/3rd mortgage and HELOCs. Once you complete your 3-5 year payment plan, you will only owe the balance of your 1st mortgage on your home and be free of the burden of a high 2nd/3rd mortgage.
- You can ‘Cram Down’ the total amount paid on your car to only what it is worth
- If you owe more on your car than it is worth and you have owned it for more than 910 days prior to filing Chapter 13, we can setup your ‘plan’ such that during the 3-5 year payment ‘plan’ you only have to pay what your car is worth instead of your current loan amount owed.
Do I need an attorney to file Chapter 13?
If you think that preparing a Chapter 7 petition and schedules is a complex process – just wait until you try to prepare a comprehensive Microsoft Excel based Chapter 13 plan as desired by the Nevada Chapter 13 trustees.
What happens when I file Chapter 13?
After filing Chapter 13 bankruptcy, the Bankruptcy Court will appoint a Trustee – a representative of the U.S. Trustee’s office. The Trustee’s job is to work with your bankruptcy attorney and your creditors to establish a mutually agreeable repayment plan and a timeframe over which a portion of your debts will be repaid. Depending on what your monthly payment will be, and the types of debt you have, your plan may last from 36 months (3 years) to 60 months (5 years). Once you have completed the repayment plan, and presuming you have followed the rules set forth by your bankruptcy attorney and the Trustee, you will receive a discharge of the remaining of your dischargeable debts.
IMPORTANT: If a collector ever contacts you after filing bankruptcy, you should inform them that you have filed bankruptcy, give them your bankruptcy case number, and tell them to contact your bankruptcy attorney at your attorney’s office number (be sure to give the creditor that phone number as well.)
MORE IMPORTANTLY: If the creditor contacts you again and attempts to collect on the debt, after you have told them that you filed bankruptcy, contact the Bankruptcy Defender. We may be able to pursue the creditor for violating your bankruptcy stay order and get the bankruptcy court to punish the creditor and require the creditor to pay you for each collection call, collection letter, and most other forms of contact attempting collections, even veiled attempts to collect after you tell them about your bankruptcy. Even if you are told that you cannot sign-up for a monthly service unless you pay your pre-bankruptcy debt, that can be a violation. Call the Bankruptcy Defender IMMEDIATELY if this occurs.
What can bankruptcy do and what can it not do?
What can Bankruptcy do?
- Eliminate most or all of your debts with the bankruptcy ‘discharge’ upon completion of your bankruptcy case. In a Chapter 13 this will occur after you have completed your 3-5 year payment ‘plan’.
- Stop the foreclosure on your home and allow you to catch-up on missed payments. NOTE: Bankruptcy does not generally provide you with the ability to keep your home and eliminate your 1st mortgage but in a Chapter 13 we might be able to eliminate your 2nd/3rd mortgages and any HELOCs.
- Prevent the repossession of your car or other property, or force the creditor to return your car or property if it has already been repossessed.
- Stop wage garnishments, harassment by debt collectors, and other creditor related actions to collect the debt.
- Restore recently disconnected utilities such as electricity, water, & gas, and/or stop the utility company from disconnecting utilities when you are behind on payments.
What Bankruptcy does not do:
- Eliminate certain rights of ‘secured’ creditors such as your mortgage company’s right to foreclose on your property or your bank’s ability to repossess your car if you are unable to continue to pay your mortgage or car payment during and after bankruptcy, even after you stop paying your credit cards and other unsecured creditors.
- Discharge certain family related debts and debts created by criminal and fraudulent acts by you, if any. These include child support, spousal support/alimony/palimony, criminal fines, criminal victim restitution, and court judgments for fraud.
- Discharge IRS taxes that are less than three (3) years old, or other state or government taxes.
- Discharge debt owed by a co-signer of your debt, such as a sibling or parent who cosigned for your credit card. Although the creditor is prohibited from collecting the debt from you, the creditor will not be prohibited from collecting the debt from the cosigner if the cosigner has not filed bankruptcy as well.
- Discharge new debts incurred after you file for bankruptcy.
What information required to file Chapter 13 bankruptcy?
Your attorney will provide you with a questionnaire for you to complete which will assist you in collecting all the information necessary to file your bankruptcy case. To assist your attorney in preparing your petition, please bring as many of the documents listed in the list of documents [LINK TO LIST] to your initial consultation. Your attorney will need to review those documents before filing anyway, so you should consider that list of documents [LINK TO LIST] as your homework. If you do not have all of the documents, bring as many of the documents that you have on the list.
In order to obtain the relief available in a Chapter 13 bankruptcy, you must provide the following detailed information to the bankruptcy court in your bankruptcy petition.
- A detailed listing of all your creditors and collection companies and/or collection attorneys that have communicated with you about you paying your debts. This list must include complete addresses, account numbers, the amount owed or that the creditor claims you owe, and the date you incurred the debt.
- Generally this can be accomplished by providing your bankruptcy attorney with a copy of the most recent bill or statement from each creditor, a credit report from all three major credit reporting agencies or authorizing your attorney to retrieve this information electronically, and a detailed list of other creditors not included in the previous two statements/reports.
- A detailed listing of all of your real property and personal property, which must include a reasonably accurate fair-market-value for the property.
- This personal property list must include things such as your furniture, your computers, your televisions and other electronics such as game systems and DVD players, your tools, your cars / trucks / motorcycles / boats / RVs, clothing, furs, jewelry, kitchen items and appliances, etc. Certain categories of personal property may be grouped together. Your attorney will explain to you which property may be grouped together as well as assist you in determining the value of the property if you are unsure.
- An accurate amount of your monthly household income, including providing your attorney with the past six months of all of your paystubs. If you do not have paystubs, please provide your attorney with the past six months of your bank statements.
A detailed listing of your monthly living expenses including accurate estimates of what you spend on rent/mortgage, insurance, food, clothing, utilities, vehicle expenses (monthly payment/gas/repairs), child care, and medical expenses.
Chapter 13 repayment ‘plans’ are much more extensive than just your bankruptcy petition. Because of this, there can be more documents required by your Attorney and the Bankruptcy Court Trustee.
The Bankruptcy Defender helps individuals file for bankruptcy in Southern Nevada, including Las Vegas, North Las Vegas, Henderson, and Boulder City.
