Thinking about filing chapter 13?

Things To Know Before Filing Chapter 13 Bankruptcy

Homeowner must qualify for Chapter 13 filing

°	Debtor, or at least one spouse, must have “regular” income from wages.
°	Debtor’s (or debtor’s and spouse’s) secured debts do not exceed $750,000 and unsecured debts do not exceed $250,000.
°	If the homeowner does not meet the eligibility requirements for Chapter 13, he will have to convert to Chapter 7, which means he would have to liquidate and lose his home.

Homeowner wages can/will be garnished

If the homeowner has a job, his employer can/will be contacted about the bankruptcy to possibly garnish the wages. If the homeowner is self-employed, then they must personally pay the plan payment to the Court.

Homeowner must pay back-payments early

The Code states that the back payments must be made up early in the plan. The homeowner must also make his regular house payment on time in addition to the new monthly payment that is paid into the “Plan”. This means his monthly house payment will be higher once the Petition for Chapter 13 is filed.

This will affect homeowners credit for 10 years

You can still get future loans, but you will pay higher interest rates and down payments. The interest rate on a car or home can be so high that the payments are outrageous. A Chapter 13 bankruptcy stays on your record during the three to five year payment plan, and could stay on your record up to 10 years beyond that.

Homeowners may still lose home to foreclosure

Most homeowners end up having their case dismissed out of bankruptcy because their monthly payments are higher after filing bankruptcy. Anywhere between 75% - 85% of homeowners fail and fall out of the bankruptcy system and end up in foreclosure anyway. They could end up in foreclosure and have a foreclosure AND a bankruptcy on their credit rating, thus making it hard to rent an apartment or another place to live. If the bank gets permission from the court to foreclose, the foreclosure picks up right where it left off before the homeowner filed for bankruptcy protection.

Questions to ask Bankruptcy Attorney before filing:

»	What are the chances I’m going to succeed in making it through this bankruptcy successfully?
»	If I don’t succeed, what will happen to my home when the court dismisses my bankruptcy?
»	What will happen if I’m late on a payment or miss a payment?
»	Why would a mortgage company file a motion for “relief of stay”?
»	What will be the additional charges by you to defend me at the hearing?
»	Can you guarantee me that you will win such a hearing?
»	What are our chances of winning at the hearing?
»	What will happen if the mortgage company wins the hearing?
»	How will that affect me and what will happen to my home?
»	Will my house go into foreclosure then?
»	How long will it take for the mortgage company to foreclose?
»	Will I have both a foreclosure and a bankruptcy on my record?
»	If I get a foreclosure and bankruptcy on my record, then what will you be able to do for me?
»	What is the benefit of me filing bankruptcy?
»	What percent of your clients fail bankruptcy?
»	Can I talk with some of your old clients who failed out of bankruptcy?
»	Can I file again if the Court dismisses my case?

Once you start asking the right questions of the attorney, bankruptcy generally is not the best option for you to pursue. There are occasions that bankruptcy makes sense, but those occasions are rare. With a bankruptcy and foreclosure on your record, it is almost impossible to find any place that will rent to you. Not to mention that both stay on your record for about 10 years. It is better to avoid bankruptcy at all cost unless you are that rare person that will make it through the entire plan without a glitch over the next 3-5 years.