Posts Tagged ‘chapter 13’

What are the Chapter 13 Bankruptcy Debt Limits?

Wednesday, October 26th, 2011

To be eligible to file chapter 13 bankruptcy and reorganize your debt, you can only have so much debt. If you are over the chapter 13 debt limits, then you may not file chapter 13 bankruptcy.

Presently, as of 10/2011, the debt limits are as followed

Unsecured Debt: $360,475

Secured Debt: $1,081,400

There are, of course, other eligibility requirements; but the debt limits can be a stumbling block, when, for example, a debtor has a large 2nd mortgage he is trying to eliminate in chapter 13 bankruptcy; that 2nd mortgage becomes unsecured debt for purposes of debt limits.

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Repeat Bankruptcies, How Soon Can You File a Second Bankruptcy?

Wednesday, October 26th, 2011

No one wants to file a second bankruptcy; heck, no one wants to file a first bankruptcy, but for many debt laden families and small businesses, bankruptcy is the only way they will regain control of their financial life. However, during prolonged economic downturns, or occurrence of some drastic event like a severe illness will drive some people to file bankruptcy a second time. So, when can you file a second bankruptcy?

There are different timelines depending on which chapter of bankruptcy you previously filed, also the timelines run from the filing dates, not the discharge date. Here are the rules:

-Chapter 7 to Chapter 7 = eight years (727(a)(8))

-Chapter 13 to Chapter 7 = six years (727(a)(9))

-Chapter 11 to Chapter 7 = eight years (727(a)(8))

-Chapter 7 to Chapter 13 = 4 years (1328(f)(1))

-Chapter 11 to Chapter 13 = 4 years (1328(f)(1))

-Chapter 13 to Chapter 13 = 2 years (1328(f)(2))

The timelines listed above relate to discharged first bankruptcies, this post is not about refilling a case that was dismissed.

As a side note, Deuteronomy 15:1 commands that debt be forgiven every seven years.

By Matt Berkus

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How Much Income Do I Need For Chapter 13 Bankruptcy?

Friday, September 23rd, 2011

There has been a recurring question lately, how much income do I need to file chapter 13 bankruptcy and save my home. The client that asks this question is usually coming off a long period of unemployment, experienced or is experiencing a career change and earning less money; as a result they fell behind on their mortgage and other bills but want to stay in their home and save it from foreclosure.

One of the requirements of chapter 13 bankruptcy is that the debtors have a regular source of income, but the code does not specify any minimum. So, the question is one of practicality, not legality. As is my custom, I tried to come up with some objective, easy to follow rules; the three “C’s.” The 3 C’s represent the ascending chances of success a debtor has in chapter 13 bankruptcy depending on their income. The criteria below are applicable to mortgage payments in the range of $1,000 – $2250 per month.

Confirmable: For a single person, with no car payment, gross monthly income should be at least double the mortgage payment, but they need to be out hustling for a higher paying job. If the debtor’s income is at least double the mortgage payment, we can usually craft a confirmable chapter 13 plan. Confirmable means that we can get the plan approved by the court, but the debtor needs to be seriously disciplined to live within a tight budget.

Confident: For a married couple or for a single person to have a confident chapter 13 plan, gross monthly income should at least be triple the mortgage payment. Confident means that baring a drastic change in income, the chapter 13 plan should succeed.

Comfortable: For a comfortable chapter 13 plan, the debtor’s gross monthly income should be at least quadruple the mortgage payment. Comfortable means that the debtor should have no issue completing the chapter 13 plan.

There are lots of creative ways to file a chapter 13 bankruptcy to save a house; cases have been filed where the person had zero income but a very high likelihood of employment in the near future. But as a goal, to have a successful chapter 13 bankruptcy, the debtor should aim for having gross income that is at least 4 times her mortgage payment.

Matt Berkus

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What is a Motion for Relief From Stay in Bankruptcy?

Monday, September 12th, 2011

A Motion for Relief from Stay (“MRS”) is usually filed by secured creditors to allow them to continue with repossession or foreclosure (that is, exercise their security interest) notwithstanding the bankruptcy.

First, when an individual files for bankruptcy, they receive the benefit of the Automatic Stay. The Automatic Stay stops all collection activity, including foreclosure and automobile repossession, against the client. Second, secured creditors have a security interest in an item of property owned by the client; the typical examples are houses and cars. Third, a bankruptcy does not extinguish or discharge a secured creditors’ security interest; the security interest survives a bankruptcy. As such, secured creditors can still enforce their security interest if the client is in default on her loan. However, because of the Automatic Stay, secured creditors are halted from initiating or continuing with the foreclosure or repossession process. The Automatic Stay continues in effect from the date a client files bankruptcy until the case is discharge.

Typical chapter 7 bankruptcies take 4-5 months and chapter 13 bankruptcies take 3-5 years. If clients are unable to become current on their secured obligations, e.g. car payment, mortgage payment; the secured creditor can file a Motion for Relief From Stay, which, if granted, will allow the secured creditor to initiate or continue their enforcement action (foreclosure/repossession) before the bankruptcy is discharged. Nine times out of ten a MRS is not an issue because the client is surrendering the item of property. In a chapter 7, if the client goes into it behind on her car payments or mortgage payments, a MRS is issued almost automatically by the secured creditor. In short, a Motion for Relief of Stay is used so that an action that is normally halted by bankruptcy may be initiated or continued notwithstanding the bankruptcy.

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101- Bankruptcy Chapters

Wednesday, February 17th, 2010

WHAT KINDS OF BANKRUPTCY CASES ARE THERE?

There are three  types of bankruptcy cases that a consumer would be interested in:

  • Chapter 7 is know as “straight” bankruptcy or “liquidation.” Debtors are provided certain cash limits on assets called “exemptions,” .  If a client is over these limits, the Debtor often has an opportunity to purchase back this property for the cash value over the exemption amount, from the Trustee.
  • Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very high and they are unable to file a Chapter 13 or 7.
  • Chapter 13  requires a debtor to Chapter 13 Plan to repay a portion of certain debt,  from what is lets in their monthly household budget, after expenses.  This is the chapter that allows you to strip a mortgage from your home or cram a car to it’s value, for repayment.

Most people filing bankruptcy will want to file under  Chapter 7.   Either type of case may be filed individually or by a married couple filing jointly.

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