What is a Chapter 13 Plan?
A Chapter 13 bankruptcy plan is a “reorganization plan” where debtors make payments on their debts over a period of three to five years. Today, Chapter 13 cases are less common than Chapter 7 “straight bankruptcy” cases.
Higher income debtors are sometimes ineligible to file Chapter 7 bankruptcy, and must file for Chapter 13 bankruptcy in order to repay some portion of their debts. The amount of Chapter 13 bankruptcy plan payments is calculated by the application of a complex multi-page formula.
Some lower-income debtors file a Chapter 13 case for one or more of these reasons:
- Stop the foreclosure of your home, and catch up on missed house payments over time.
- Reset payments with a car lender who is threatening to repossess your vehicle.
- Repay your defaulted IRS taxes interest-free.
- Restore your drivers’ license that was suspended for nonpayment of court fines and tickets.
Depending on income, many Chapter 13 bankruptcy cases propose to repay little if any general unsecured debts, including medical bills, defaulted obligations to landlords, and credit card debt.
Many debtors in Chapter 13 bankruptcy are good, hardworking folks who are struggling to get by financially. Some folks are “on the edge” financially, and some of their Chapter 13 bankruptcy plans do not complete. In those cases, their Chapter 13 bankruptcy plans are dismissed, and their creditors can restart collection calls and collection lawsuits against the debtors.
If your Chapter 13 bankruptcy plan is dismissed, either because it can’t be modified, or the modification to your Chapter 13 bankruptcy plan isn’t filed in time, eventually your creditors will return and start attempting to collect their respective debts again. Your creditors can collect again because no discharge of debts was issued since your Chapter 13 bankruptcy plan wasn’t completed.
In general, Seasoned Attorneys can often secure a court order to reduce the payments and/or forgive accumulated payments. A qualified and caring Chapter 13 practitioner can and will ask the judge to “modify” the plan to meet your changed circumstances. A conversion to Chapter 7 bankruptcy may also be an option, or a filing a new Chapter 7 bankruptcy case after your Chapter 13 bankruptcy case is dismissed. In many cases, “straight bankruptcy”, also known as Chapter 7 bankruptcy, is preferable to long-term credit recovery.
A debtor who is fresh out of a failed Chapter 13 plan can be sued by creditors once their bankruptcy plan or case is dismissed when these conditions are met:
- When the statute of limitations to file suit on a tort or breach of contract expires after the dismissal date of the Chapter 13 bankruptcy plan.
- When the Chapter 13 plan is dismissed for the debtor’s default because of failure to make the Chapter 13 reorganization plan payments.
11 USC 108(c) (1) generally provides that bankruptcy does not interrupt the running of a statute of limitations. If the creditor had six years to file a lawsuit from the date of breach of contract, the six-year period is neither shortened nor extended by the bankruptcy as long as the Chapter 13 bankruptcy plan begins and then fails over a time period that is within that six-year statute of limitations to file suit.
Understanding the Status of Limitation
Suppose that you are a debtor who breached a written contract with one of your creditors on August 1, 2009 and then after the creditor hounded you for a year, you the debtor filed Chapter 13 bankruptcy on September 1, 2010. The six-year statute of limitations to file suit to collect this debt starts on August 1, 2009. If your Chapter 13 bankruptcy case is dismissed without issuance of a discharge on September 1, 2014, due to defaults or failures in the Chapter 13 bankruptcy plan payments, the creditor still has a long time to file suit against you the debtor. The creditor can file suit as late as July 31, 2015 because the statute of limitations to file suit runs out on August 1, 2015, some six years after the breach of contract on August 1, 2009, and almost a year after the Chapter 13 bankruptcy case was dismissed for non-performance on September 1, 2014.
As we can see from the example above, the deadline to file suit to collect a debt is six years after the breach. The deadline is neither extended nor shortened due to the fact that the debtor was in bankruptcy during the six-year time period.
What Can Homeowners Do If their Chapter 13 plan is unaffordable?
If your Chapter 13 bankruptcy plan is becoming too expensive for you to continue as is, contact a seasoned Bankruptcy Attorney to ask the court to reduce the payment. If your current Attorney is not cooperative, (As most bankruptcy law firms are “Mills” that just process bankruptcy paperwork and collect their payments included in the plan over a 5 year period), so in most cases, your current Attorney might not be willing to work with you. Most homeowners in chapter 13 may already have experience about this, that is why, in most cases, your bankruptcy Attorney will refuse to pursue your pretender lender through the Bankruptcy proceeding called “Adversary Proceeding” which is designed to force the pretender lenders to proof their interest in your property. Many homeowners are in a “sorry state”, for using the wrong Attorneys in the Bankruptcy proceedings because many Bankruptcy Attorneys have no clue how to pursue lenders using “Adversary Proceeding” or they are unwilling to work hard to secure the interest of the homeowner. After all, many new Bankruptcy filers will come knocking soon, so why bother with this one homeowner.
Remember this: “You used this current Attorney on “Emergency Last Minute” Chapter 13 filing to “save your home” from either the legitimate creditors or the criminals (pretender lenders) that were trying to steal your home”.
However, your Bankruptcy Plan is no longer an “Emergency” but a “Reality” of what you could afford to pay over a 5 year period in order to continue staying in your home. So if you are not serious to get the payment to the affordable range at this initial time, chances are you will end up missing payments in the future which may lead to dismissal of your chapter 13 case.
As a result, all the effort you made to save your home for years will be flushed down the drain because of using the wrong Bankruptcy Attorney.
So if your present Attorney is not cooperative, “Fire Him” and replace him with another Bankruptcy Attorney, your interest is on the line here not his.
This is why in most case, many homeowners loses their homes even while in Bankruptcy. That is why many will tell you that Bankruptcy could only delay foreclosure, but not stop it.
That is a BIG lie! As a homeowner you DO NOT need to believe that!
Bankruptcy is there for a reason and when used properly and effectively, does its job. Most homeowners loses out on their cash and property as a result of using the wrong Attorney. This is a do or die situation and you have to fight like your life depends on it. After all, the equity in your home is on the line which can make a hell of a difference, the type of life you can live in the future i.e “being Rich or being broke”. That is why you often hear that most capitals are made in “Real Estate”. (Collecting those “equity” in the homes).
Do Not Give Up So Soon!
For homeowners who are not representing themselves in Bankruptcy, we recommend using a seasoned bankruptcy Attorney.
A seasoned Bankruptcy lawyer might be able to modify your Chapter 13 bankruptcy plan payments to something more affordable.
You new Attorney once he comes on board can request some time with the court to modify your plan that will be presented with the court. The plan is to allow you the best possible lower months payment at the initial period so that within a year of making that low monthly payments into the Bankruptcy plan, you can then request a “mortgage loan refinancing” from the Trustee, then after your refinancing gets you even lower payments, you can then exit the plan, dropping the entire Bankruptcy without completing the plan and discharge. You will then resume your normal life while rebuilding your credit as a normal person; still living in your home and building your equity. Your old lender will no longer come after you as the lien on your home has already been paid off by the refinancing new lender. You are now going to be making your new payment directly to the new lender stress free.
For a list of some of the lenders who could refinance your home while you are in Bankruptcy, please see other posting in our blog under Bankruptcy.
When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;
Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.
If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net