Chapter 13 of the Bankruptcy Code is designed primarily to allow individuals to become current on payments that they are behind on their mortgage or a motor vehicle. The filing of a Chapter 13 stops a foreclosure and prevents a repossession of a vehicle. It also stops a garnishment. In Chapter 13, a homeowner is given 48 months to catch up on the amount that he is behind on his mortgage, providing he is able to resume making monthly payments going forward during his plan. The owner of a vehicle subject to a loan has up to 5 years to pay off the loan at a low rate of interest ( currently at 4.75% in Missouri). However, if the loan is more than two and a half years old, then the law only requires that the value of the vehicle be paid. A Chapter 13 also allows a debtor to pay delinquent tax debt over five years without interest or penalties. Unpaid unsecured debts are discharged at the conclusion of the case as in a Chapter 7 case.
A Chapter 13 may be filed minutes prior to a foreclosure, and it will still stop the foreclosure. Even after repossession of a vehicle, if the case is filed within ten days of the repossession, then the court will order the lender to return the vehicle to the Debtor.
Chapter 13 may also be used where a Debtor would have to give up property if he filed a Chapter 7 case. For instance, if a person had $50,000 of credit card debt and owned a vehicle worth $10,000 (without a lien against it), if he then filed a Chapter 7 he would have to surrender his vehicle to a Trustee in order to receive a discharge of his credit card debt. However, if he filed a Chapter 13 case, he would keep the vehicle and in exchange for being able to keep the vehicle, he would pay the value of the vehicle over the course of the chapter 13 plan. When the case ends, all of the credit card debt is discharged and the debtor retains his vehicle. The same would apply to any property which has equity and value which a person would have to otherwise surrender in a Chapter 7 case. The essential ingredient to the success of a Chapter 13 plan is a Debtor who makes monthly payments on time to a Trustee according to the terms of his Chapter 13 plan.
Regarding the process of a chapter 13 case, approximately 30 days after a case is filed the debtor will have a short meeting with a trustee, the person to whom you will make your payments. I attend that meeting with the client. There will normally be twenty or thirty Chapter 13 filers on the docket and the Trustee will call one case at a time. The Chapter 13 trustee examination will generally last for five to ten minutes with most of the questions being informational and for the purpose of confirming the information contained in your paperwork filed with the Court. If the case is more complex the meeting will normally take longer. In Missouri the Trustee meetings are held in a meeting room at the Eagleton Federal Court House in downtown St. Louis . In Illinois the meetings are held in the administration building adjacent to the District Courthouse on Missouri Ave. in East St. Louis. If you would like to learn more about Chapter 13 please click on the following link United States Courts - Bankrupcty. If you would like to make an appointment for your free consultation please click here.