What can a Chapter 13 bankruptcy do?

A chapter 13 bankruptcy is considered a wage earner bankruptcy so that a debtor can make a monthly payment plan for managing his or her debt that lasts three to five years.  Whereas a debtor in a chapter 7 bankruptcy will get a discharge in roughly 3 months a chapter 13 debtor will not get a discharge until the payment plan has completed or a hardship discharge is granted.

People use a chapter 13 bankruptcy to:

• Get caught up on their like home payments.
• Get caught up on other types of secured loans: Car Loans, Personal Loans, Bob’s Furniture, Best Buy, Taxi Medallions- You name the type of loan.
• Stop a sheriff sale
• Stop a foreclosure action by your bank
• Stop a NJ Tax Lien Foreclosure
• Allow you to pay back taxes on your home over a 3 to 5 year period.
• Stop a garnishment
• Stop a court case from proceeding.
• Get a repossessed vehicle back.
• Cram down the value of a car loan that is older than 2.5 years old so that only the value of the car is paid and now what is owed normally at a lower interest rate.
• Cram down other secured property like investment property or a New York City Taxi Medallion.
• Pay past due income taxes and/or domestic support obligations like alimony and child support over the length of the Chapter 13 payment plan.
• Discharge debt that is not discharged in a Chapter 7 bankruptcy, or file a chapter 13 when they are not eligible for a chapter 7 bankruptcy.

Many of these things also happen with a chapter 7, but a chapter 13 can help you save secured property. Also when people do not qualify for a chapter 7 bankruptcy, they can use a chapter 13 to pay off their unsecured loans or credit cards. So that if a trustee would look at selling your property in a chapter 7, you would be able to keep it in a chapter 13 bankruptcy.

What is a CramDown in a Chapter 13 bankruptcy?

A “CramDown” in a Chapter 13 bankruptcy reduces what you owe on an item secured by a loan. Most items outside of your personal residence that are secured by a loan are able to be crammed down if the loan is over a year old.  While a car loan needs to have been taken out over 910 days before a cramdown is available.  By taking advantage of a cramdown in a Chapter 13 bankruptcy, you may be able to save your New York Taxi Medallion, car, investment real estate, or other property secured by a loan.  You can stretch out the payments, and possibly lower the interest rate.

Can a CramDown in a Chapter 13 bankruptcy save a New York City Taxi Medallion?

I like to use New York City Taxi Medallions as an example for cram downs. Many people find themselves unable to support their payments for their NYC Taxi Medallions however with a chapter 13 they may be able to afford to keep the medallion. Many people bought at the top of the market paying over a million dollars for their taxi medallions. Now many people owe $800,000+ on the taxi medallion loan, and see no way of paying it back, however putting together a plan to pay the actual value of the Taxi Medallion is a lot easier to have someone pay it off in 5 years. Paying $75,000 or $100,000 with interest over five years is much easier than paying $800,000.  It is even hard to get an exact value of a taxi medallion as some people are paying cash for medallions at incredibly low rates.

How long does a Chapter 13 payment plan last?

A chapter 13 can be paid back over a three or five year period. The repayment period is based on the filer’s income. Most people opt for the five year period because that means the payments of the bankruptcy trustee will be less over time, but there are more payments. Because if you have to pay the same amount back more payments at a lesser amount instead of bigger payments for a shorter time.

When would you use a three year chapter 13 plan?

If you have debts that basically aren’t going to be discharging in a Chapter seven bankruptcy, and you do not need to file a 100% payment plan. Then you could use the chapter thirteen to have some of these debts discharged. This video explains the difference between chapter 7 and chapter 13 for what debts are forgiven.

After a debtor finishes making their payments for three to five year period any unpaid debts are discharged like in the chapter seven bankruptcy.

What are the debt limits to file a chapter 13 bankruptcy?

So there are debt limits would file a chapter 13 and these normally change a little bit every year. As of April 2019 the adjusted debt limits to qualify for Chapter 13 are: $419,275 for a unsecured debts which is up from $394,725 in 2018, and $1,257,850 for a debtor’s secured debts  which is up from $1,184,200 from 2018.  So, in April 2020 we will probably see these limits increase again.

What if my debts are too high to file a chapter 13?

When a person has too much debt and still wants to repay their debts with a repayment plan or avoid having their assets sold in Chapter seven, then they have to look into filing a chapter 11 bankruptcy.

If you have any questions, feel free to give our office a call. You can talk to a NJ Foreclosure Defense attorney or a New Jersey Bankruptcy attorney  We’ll go over whatever questions you have.  If you are concerned about which debts you need to have forgiven please talk to an attorney. Call us at 973-200-1111 or email us at info@focusedlaw.com.