There are two main types of bankruptcy you can file: Chapter 7 and Chapter 13.

Chapter 13 can provide relief for you even if you need assistance but can’t file a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy you pay back a percentage of your debt. The remainder of the debt is discharged through the bankruptcy. The amount of the debt that you pay in a Chapter 13 varies, based upon several factors. You make a monthly Chapter 13 Plan payment to the Chapter 13 trustee who then distributes the money to your creditors. The period of time that you are in a Chapter 13 bankruptcy is 3 to 5 years, depending upon the circumstances.

Attorney Mary Lou Burns works closely with you to determine the terms of your plan, seeking to obtain the most favorable terms, while achieving your objectives. The Chapter 13 plan is filed with the Court and is subject to Court approval. Once the Plan is confirmed by the Court, your Creditors are required to follow the plan. The Court oversees the entire process and Mary Lou Burns remains involved and active in your case until you receive your discharge.

Some people cannot qualify for a Chapter 7 bankruptcy because their income is too high. If your annual income is greater than the Median Income for your household size, we are required to do further testing under the Means Test, which involves several variables. If there is too much income remaining after subtracting certain expenses, you cannot qualify for a Chapter 7 bankruptcy.

The Chapter 13 Means Test Calculation is a basis for determining what your required plan payment is and the percentage of your debt you must payback. You are required to be in the Chapter 13 Plan for 5 years when your annual income exceeds the median income for your household size.

You cannot be required to turn over property in a Chapter 13 bankruptcy (except for a tax refund). If there is too much unprotected equity in a piece of property and you would lose it in a Chapter 7, and you want to keep it, filing a Chapter 13 is an option. You would be able to keep the property and pay to the trustee in the Chapter 13 bankruptcy the amount that the creditors would have received in a Chapter 7. This is referred to as the Liquidation Test.

If you are behind in your mortgage, you can get caught up on the mortgage payments by curing the mortgage arrearages through the Chapter 13 plan. This would allow you to keep the property and prevent the mortgage company from taking it to a sheriff sale.

After the filing of the Chapter 13 bankruptcy, you would be required to make a monthly Chapter 13 plan payment to the Chapter 13 trustee. The monthly plan payment includes the amount needed to pay the mortgage arrearages plus the trustee and attorney fees. You would also have to resume making the regular mortgage payments and, depending upon which filing district you are in, these may have to be rolled into the total Chapter 13 plan payments.

You may file a Chapter 13 bankruptcy within 4 years from the date that the prior Chapter 7 bankruptcy was filed and pay back a portion of your debt in the Chapter 13 bankruptcy. The remaining debt would be discharged in the bankruptcy.

You can file a special action to strip the second mortgage in the Chapter 13 when the amount owed on the first mortgage is greater than the value of the property.

Under certain circumstances, you may be able to “cram down” the value of your vehicle in a Chapter 13 bankruptcy, paying for your vehicle in the plan at its fair market value. It may also be possible to substantially reduce the interest rate.

Attorney Mary Lou Burns will work closely with you to create a plan that meets your objectives, seeking to obtain the most favorable terms. She will remain involved and active in your case, until you receive your discharge, answering your questions and addressing your concerns.