What Debts Will Be Released By A Chapter 13 Bankruptcy?
Generally, it’s the same as a Chapter 7. You discharge your debts, and in Chapter 13, every debt you address in your plan would ultimately be discharged. The main difference is that it takes five years to accomplish what can be completed in about 60 days after a 341-meeting using Chapter 7. What is the same to a certain extent is that in both Chapter 7’s and Chapter 13’s, federally guaranteed student loans are not dischargeable unless in the later it can be paid in full within five years. If not, the federally guaranteed student loan creditors receive payments for five years under the plan, with normal payments resuming after the debtor is discharged in the Chapter 13.
Will The Bankruptcy Code Be Adjusted To Allow For Discharge Of Student Loan Debts & Medical Debts?
Medical debt is typically dischargeable. They are a creditor like any other regarding Chapter 13. At the end of the 5-year plan period, you have to satisfy the bankruptcy court that you’ve completed your payments, and then the court will issue you your discharge. Student loans are currently a hot topic. I am of the opinion that allowing them to be discharged either in a Chapter 7 or a Chapter 13 makes sense than forgiving them. The government is talking about limiting the student loan forgiveness to $10,000 or $50,000. I represent a couple who has filed a Chapter 7. They both have masters’ degrees in social work. They make a nice living, and together they make about $100,000 a year.
Together they have $450,000 of student loans that their children and children’s children may eventually pay off. Even if there would to be given forgiveness, they’d still have $400,000 worth of student loans. I remember when you could discharge student loans, and then somebody who had a stronger lobby and decided it was an abuse that needed to be reined in like so many other things.
Will I Lose All Of My Property Or Assets In A Chapter 13 Bankruptcy?
I would say that 99% of the time, most debtors, especially in Massachusetts who file either a Chapter 7 or a Chapter 13, all of their assets are exempt. You can take either the federal or state exemptions. For people who don’t own any real estate, federal exemptions cover the majority of their possessions. Pension plans, 401(k)s are generally exempt. The only difference in Chapter 13 is that it takes five years for you to accomplish what you can in a Chapter 7 can be accomplished in four months. In a Chapter 13, you make a payment every month, and yes, they make it easy for you to set up automated payments and have the monthly payment taken directly from your account. The main thing is to make and stay current with your plan payments!
What happens if you are in a Chapter 13 and for instance you suddenly need to replace one of you cars. It’s not the end of the world. You can shop a new car and the acquisition can be accomplished with one proviso; the financing for the replacement vehicle needs to be approved by the bankruptcy court. In one case, the financing was approved, and the loan went through and my clients had a replacement vehicle. In the other case, the financing was approved, but the acquisition did not go through because the lender thought the clients’ bankruptcy, a Chapter 13, would be dismissed. I have a client who is trying to refinance her house. She can do the refinancing in Chapter 13, but it needs to be approved by the bankruptcy court. Sometimes just because people make a good living, they can’t take any new credit. Everybody is sort of stuck in the plan payment. It’s ridiculous for the debtor to be handcuffed financially for five years so some unsecured creditors to ultimately get 20 cents on the dollar for over five years, but then again, I was born a cynic.
How Long Does A Chapter 13 Bankruptcy Case Typically Take?
It takes five years from the filing date. In Chapter 13, generally, you have a choice. There are 36-month plans, but I prefer 60-month plans, especially if there are mortgage arrears that you are looking to satisfy in your Chapter 13 plan. To give you an example, I had this couple who were very efficient. They thought that they would pre-pay their plan. So, instead of just paying their monthly payments and life going on, they paid their plan off. I don’t remember exactly, and it was in 44 or 46 months. The Chapter 13 Trustee filed a motion saying that if they could pay off the plan early, they could certainly pay their creditors more money. They wound up being in their Chapter 13 plan for another year. The moral of the story . . . no-good deed goes unpunished.
Why Do I Need An Attorney To Help Me Through My Chapter 13 Bankruptcy?
I think that Chapter 13 is a more sophisticated process than Chapter 7. I don’t recommend anybody doing either a Chapter 7 or a Chapter 13 alone. In a Chapter 7, you need to put together your assets and liabilities, take a course online prior to filing and provide the Chapter 7 Trustee a variety of documents and proofs. A Chapter 13 includes all of the aforementioned and adds the means test using six months of income for the calculation. This has to be done in Chapter 7 too, but there is more fine-tuning involved because you have to determine what your disposable income is and then provide for the filing of a Chapter 13 plan.
There is also a lot of paperwork involved in a Chapter 13. Objections can and will be filed to your Chapter 13 plan. It becomes like a tennis match . . . plan filed, objection filed, amended plan filed ad nausea! I’m an old-fashioned attorney, been doing this for forty years, and believe in making a phone call rather than killing electronic trees. If there is a problem, it can be dealt with between the parties.
We have enough work to do as it is, and we don’t need more. But that’s why you are better off with an attorney, especially in Boston.
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