Reducing or Eliminating Vehicle, Credit Card, and Mortgage Payments Through Chapter 13 Bankruptcy
Typically, the three largest payments for a household are the mortgage, vehicle payments and credit cards. The order from largest to smallest of the three payments can vary from household to household but the combined total of these payments can represent most of the income earned on a monthly basis. If there are any financial issues, such as the loss of a job or reduced earnings, the sum of these payments can exceed monthly income leading to the exhaustion of savings and growing levels of stress caused by collection calls and worries about losing the home and/or a vehicle.
Fortunately for people struggling under these circumstances, there is a single answer which can reduce payments on the mortgage, vehicles, and credit cards; hiring a bankruptcy attorney to file and navigate a Chapter 13 bankruptcy. Benefits start accruing immediately as all collection efforts by creditors, including repossession, foreclosure, and collection calls must legally be stopped once a bankruptcy attorney files the Chapter 13 petition. Other benefits occur as the bankruptcy process unfolds.
A Chapter 13 bankruptcy typically begins with an initial consultation with a bankruptcy attorney. It is in this meeting where a strategy to reap the best result for the filer starts to take shape. The consultation will focus on money owed and payments being made on these three areas:
* Credit Cards – Credit cards are considered to be unsecured debt by the bankruptcy court. In a Chapter 13 filing, credit card balances and payments can be reduced by amounts ranging from 75% to 100% (complete dismissal). Payments on balances are then incorporated into a payment plan along with other debt balances listed in the bankruptcy petition. These court-approved payment plans typically last five years.
* Mortgage Payments – Missed mortgage payments are incorporated into this payment plan as well. One of the biggest money-saving benefits of a bankruptcy attorney navigated Chapter 13 is known as “lien stripping”. Lien stripping is permitted by the bankruptcy court in situations where subordinated loans exist on the residence and its value has decreased to a level below the amount due on the first mortgage. The subordinated loans, which can include home equity lines, seconds, thirds, etc., are then considered to be “wholly unsecured” and are then treated in the same manner as credit cards and other unsecured debts. This benefit alone can save hundreds of thousands of dollars, depending on the size of a person’s subordinated loans.
* Vehicle payments – Known as an auto loan “cram down”, this benefit is available to filers who have purchased a vehicle at least 910 days prior to the bankruptcy attorney filing the Chapter 13 petition. The second requirement is that the vehicle must have a value which is lower than the existing balance owed on the car. Under these conditions, the court can reduce the balance owed to the lender to the current value of the car. With the payments rolled into the payment plan, the payoff schedule can also be extended significantly. The combination of paying down a reduced balance with an extended payoff can reduce the monthly payment on the car by over 75%.
Chapter 13 bankruptcy proceedings are extremely complex and require intensive planning with a bankruptcy attorney. If you are struggling with the load of your monthly payments, filing a Chapter 13 can provide significant relief. To schedule a consultation to see how a Chapter 13 bankruptcy can help you, visit http://www.feldmanlawcenter.com/ or call (800) 527 8497.