Chapter 13 Bankruptcy

How Can a Chapter 13 Bankruptcy Help You?

Save Your Home

If you’re behind on your house payment, don’t give up hope yet. You can still save your house. Even if the mortgage company is telling you that you have to pay months and months of payments right now or they’ll foreclose, there’s still time to save your house. 

Even if the foreclosure process has already begun or there’s been a sheriff’s sale, it is not too late to keep your home.

With a Chapter 13 Bankruptcy, you can save your home by legally spreading the amount you’re behind over 3-5 years. This can be a huge help for homeowners who are overwhelmed by past-due payments.

Keep Your Car

Is your car lender actively trying to repossess your car? If you’re behind on your car payments, a Chapter 13 Bankruptcy can also help you keep your car. If you have a job or regular income, our team can help you lower the payment and interest rate. With a Chapter 13, the amount you owe on the car can be lowered and spread out over 3-5 years making it much easier to keep your car. Being able to save a car can mean saving your job. We’re here to help you do that.

At Affordable Legal Services of Oklahoma City, we pride ourselves on helping people get out from under a bad car loan. For example, if you owe $20,000 on a car, but it’s only worth $12,000, we can reduce the amount of debt you owe and reduce outrageous interest rates so the payments are much lower. When that lowered payment is stretched out over 3-5 years with a Chapter 13 Bankruptcy, it becomes much more manageable. 

Relief from the IRS

Is the IRS bearing down on you for tax debt from the last two years? Those taxes aren’t dischargeable in a bankruptcy, but they can be spread out over time into manageable payments.

In some situations, people will drain their retirement without realizing the tax consequences of doing that. All of a sudden, they owe thousands of dollars to the IRS, but they’ve already spent it all. With a Chapter 13 Bankruptcy, you can spread the payments of what you owe over 3-5 years and get a better repayment plan. We can also discharge any IRS debt that was due 3 or more years ago.

Discharge Your Debts

A Chapter 13 Bankruptcy offers the opportunity to reorganize debts. In a Chapter 13 Bankruptcy, we eliminate all unsecured debt (credit card, medical, etc) and reorganize secured debts for clients who’d like to save their house or car or deal with the IRS.

We can help you get back on track. Contact us now to schedule a free consultation and get your bankruptcy questions answered.

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What is the Difference Between a Chapter 7 and Chapter 13?

To find out whether a Chapter 7 or Chapter 13 Bankruptcy is best for you, our team will help you evaluate your unique situation. In Chapter 7 Bankruptcy, you are generally discharging all of your debts and may keep your home and vehicles if you are current on house and car payments. It usually takes 90 days to complete. For more specific questions about Chapter 7, please visit our Chapter 7 Bankruptcy page.

A Chapter 13 Bankruptcy includes several special laws that allow you to reorganize some of your debts. For example, you can spread out payments that are behind on your home or car over 3 to 5 years. You can cram down the amount you owe on your car if you are upside down and only pay back what it is worth if the loan is over two and a half years old. A Chapter 13 will last from three years to five years depending on your needs and circumstances. We often are able to lower the total monthly payment for house and automobiles from what you are currently paying, even after attorney fees and costs. 

How Much Does a Chapter 13 Bankruptcy Cost?

To file your Chapter 13 Bankruptcy, all we require is a $1,000 payment. 

The rest of your attorney fees will be included in your Chapter 13 plan in a manageable monthly payment.

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Frequently Asked Chapter 13 Questions

Making the Chapter 13 Decision

How long does a Chapter 13 last?

 A Chapter 13 Bankruptcy lasts a minimum of 3 years and a maximum of 5 years. During this time, those who file bankruptcy will be making monthly payments to the bankruptcy court to get current on secured debt like a house or car they’d like to keep.

Should I do a debt consolidation or Chapter 13?

Debt consolidation is an offer scam companies make to essentially pay off your debts from multiple creditors and take over your loan so you just pay the debt consolidation company one payment. They also might offer to sell those loans for you to potentially give you slightly lower payments. At the end of the day, debt consolidation makes it where you’re still paying off the same amount of debt. Typically, all the debt consolidation loan does is delay the inevitable bankruptcy.

A Chapter 13 bankruptcy can ensure relief from this overwhelming debt. Most, if not all your debts will just go away. With debt consolidation, your credit score is already greatly reduced. If you choose a Chapter 13, your credit score is going to go up a year after you file.

Can I get a Chapter 13 Bankruptcy for my business?

For people considering a business bankruptcy, or a bankruptcy for an LLC, if you’re not trying to save the business, you can simply file a personal bankruptcy. 

In most small businesses, the owner has equal liability as the business. So if you file bankruptcy for your business, you may still be personally responsible for those debts. In many cases, it’s better to look at your personal exposure and file personal bankruptcy. 

Can I file a Chapter 13 Bankruptcy on my own?

While there are certain legal proceedings you can file on your own, like a simple divorce without children or a small claims action, bankruptcy is not one of those things. Of course, anyone is entitled to try to file a bankruptcy or any kind of case, but the many complexities involved make it extremely difficult. 

The problem with filing a Chapter 13 on your own, is that if you fail, it can have negative consequences. When a mistake is made, the case is often dismissed. When you refile it, the automatic stay expires after 30 days. If your case is dismissed twice, there is no automatic stay. This is a problem because an automatic stay is what stops an impending foreclosure and all collection activity. Foreclosure, repossession and garnishment will move forward if mistakes are made and multiple bankruptcy filings are dismissed. So trying to file a Chapter 13 Bankruptcy on your own puts you at risk. Our attorney has practiced bankruptcy for over 20 years and has all the necessary education and experience to help you get the relief you need with a Chapter 13 Bankruptcy.

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Chapter 13 and Your Family

Will my non-filing spouse be affected if I file Chapter 13?

No, whether it’s a Chapter 7 or Chapter 13 Bankruptcy, the non-filing spouse if not affected in any way. 

What is a marital adjustment deduction?

In order to determine if you qualify for a Chapter 7 Bankruptcy, we have to include a non-filing spouse’s income. We perform a Means Test and analyze if there’s enough income to pay current bills. A marital adjustment means that a non-filing spouse’s income is not included in the Means Test calculation. This might be the case if the non-filing spouse’s income is spent separately on their own expenses.

The calculation of a filing spouse’s qualification to file a Chapter 7 bankruptcy is complex. Many lawyers don’t know this exists and miss it when filing bankruptcy. You’ll hear lawyers advise clients that they have to file a Chapter 13 because they and their spouse make too much money. However, this isn’t always the case. 

At Affordable Legal Services, if a Chapter 7 makes sense for you, we’ll help make that happen. We help our clients get rid of their debts when possible and avoid making a non-filing spouse pay for your bills. We are here to analyze your unique situation and recommend the best possible solution for you. 

What happens to jointly-owned property in Chapter 13 Bankruptcy?

You can include jointly-owned property in a Chapter 13. An interesting fact is that the automatic stay that stops creditors from foreclosing on a home or repossessing property also benefits any co-debtors. If a joint-owner can pay for the property, they can do that instead. We have used a Chapter 13 to save inherited property before, so there are many ways we can assist in this area.

Unsecured Debt and Chapter 13

What happens to unsecured debt in a Chapter 13?

In Chapter 13 Bankruptcy, unsecured debt (credit card, medical, etc) will be discharged or paid back. If you make a high income and don’t qualify for a Chapter 7 Bankruptcy, some or all of the unsecured debt you have may get paid back, but on better terms. Whatever debt is not paid back will be discharged, or in other words, eliminated. This means that at the end of a Chapter 13, you walk away with no unsecured debt, no car loans and are current on your house.

If you want to pay all of your credit card debt in your Chapter 13, you can do that. The great thing is, if you’re paying debt with interest that’s out of control, a Chapter 13 will stop that and lower the interest to zero. That’s a huge benefit of filing bankruptcy.  

How much cash can you keep in a Chapter 13 Bankruptcy?

As a general rule, cash is not exempt from bankruptcy. However, the bankruptcy court will likely not come after $25 or $150. There is no exact number that the bankruptcy court can take. Our estimate is, that if it’s less than $1,000, you’ll likely get to keep it. If you have more than $2,000 in cash, the bankruptcy court will look at if it should be applied to your debts, depending on where the money came from. If the money is from social security or earned income tax credit, it may be exempt. 

What happens to a 401K or other retirement accounts in a Chapter 13 Bankruptcy?

A 401k is exempt from any kind of bankruptcy. You could have a million dollars in your 401k and you can file bankruptcy and keep every penny of it. The same goes for any kind of tax-deferred retirement account.

The mistake most people make is to pull from their retirement to try and pay off overwhelming debt. In the process, they lose that exempt asset and they have no retirement. If you need to file bankruptcy, for whatever reason, just do it. Don’t lose your retirement if you can help it.

How does a Chapter 13 affect my taxes?

As a general rule, if you receive a tax refund while you are in Chapter 13, you’re required to turn over that tax refund to the court to be applied to your debts. That is the biggest impact you’ll have from your Chapter 13 on your taxes.

Houses and Chapter 13 Bankruptcy

Can I buy a house during a Chapter 13 Bankruptcy? 

Incurring new debt while in a Chapter 13 requires approval from the Chapter 13 trustee. You can buy a house or car, but within reasonable means. The trustee likely won’t approve a million-dollar house while you’re making Chapter 13 payments. However, if you have a non-filing spouse, they can purchase any home or car they want with their own income. 

We often see clients sell a house to move to a similar priced or lower priced home. Sometimes our clients need to move. Those situations will likely be approved.

Can I sell a house during a Chapter 13 Bankruptcy?

Yes, we frequently sell houses for Chapter 13 clients. It requires approval from the court, but that approval is routinely granted. The funds from selling a house are typically exempt from your bankruptcy and can be used to buy a different house. If you’d like to sell a house during a Chapter 13, contact your attorney.

Can I buy a house after my Chapter 13 Bankruptcy is discharged?

Yes, however, it will generally take until 2 years after a bankruptcy to get conventional financing for a home. This is a rule mortgage company’s follow. 

After Chapter 13 Bankruptcy

What happens after a Chapter 13 discharge?

At the end of your Chapter 13 process, generally 3-5 years later, the Bankruptcy trustee will send a letter to the lenders you’ve been paying off to tell them how much you’ve paid and that you are now current on your loan. The lender then has 10 days to agree or disagree that the debt is settled. After that, the trustee analyzes everything and completes the paperwork to discharge the bankruptcy.

This means that a Chapter 13 discharge doesn’t come immediately after the last day of your payment. It takes some time for the trustee to contact lenders and file the discharge paperwork. The purpose of this lender notification at the end of your Chapter 13 case is to make sure that lenders are aware you’ve made all the payments and that everyone is on the same page.

There are scams out there where fake lenders may contact you and say you still owe money. That’s another reason why the bankruptcy trustee confirms with lenders that the debt is paid and the bankruptcy is over. We are still here to support you and answer any questions when the time for your Chapter 13 discharge comes.

Can I get a Chapter 13 Bankruptcy dismissal?

In some occasions, our clients no longer need or no longer are a good fit for a Chapter 13 bankruptcy. This may happen if income or social security drops and a client can no longer afford their Chapter 13 payments. At that point, we can help convert the Chapter 13 into a Chapter 7 bankruptcy.  

In other cases, our clients might simply need a Chapter 13 so they have time to get a loan modification on their mortgage, and once that’s done, they don’t need to Chapter 13 anymore. Because loan modifications don’t stop foreclosures, a Chapter 13 can be used to prevent foreclosure and provide time for the modification. 

You can get your Chapter 13 bankruptcy dismissed, however, we have to file a motion to dismiss in order to do that and get court approval. In most circumstances, the court approves.

Can I file Chapter 7 Bankruptcy after a Chapter 13 Dismissal?

Yes, we can help you convert your Chapter 13 into a Chapter 7 after a dismissal. If your Chapter 13 was dismissed, you can file a Chapter 7 at any time. If your Chapter 13 was discharged, you have to wait a number of years before you can file a Chapter 7.

Do I have to negotiate with creditors if my Chapter 13 is discharged or dismissed?

If you have made all your payments and your Chapter 13 is discharged after the agreed number of years, you don’t have to negotiate with creditors. 

On the other hand, after a Chapter 13 dismissal, the debts are all still there. A Chapter 13 dismissal is when you decide to end your Chapter 13 early and file a dismissal. If you don’t pay the debts, the debts will still be there. Creditors can resume collection and you’ll have to pay debts or negotiate with creditors. 

We’ve Helped 1,000s of Oklahomans Get Back on Track with a Chapter 13 Bankruptcy.

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