I consider Chapter 13 more powerful than Chapter 7 because you can pretty much receive all of the benefits that Chapter 7 provides, plus Chapter 13 gives you the opportunity to deal with additional issues that are not covered by Chapter 7. Clients can achieve many things through a chapter 13 bankruptcy.
You can stop a foreclosure and a sheriff's sale, and pay back your mortgage arrears in monthly installments over 5 years, while you keep making your regular monthly mortgage payments.
You can attempt to work out a deal with your mortgage company that would put all of your arrears at the back end of the mortgage, reduce your interest rate, and reduce your monthly mortgage payment. For example, let's say you are $24,000 behind on your mortgage payments, your interest rate is 6%, your monthly payments are $2000, and you are facing a sheriff's sale. If we filed a Chapter 13 for you and obtained a successful loan modification, here is an example of the result we might be able to achieve: First, the sheriff's sale would be stopped, and you would no longer have to worry about losing your home. Second, you would no longer be behind on your mortgage. The $24,000 arrears would be placed at the back end of the mortgage. Your mortgage would be classified as totally current on your mortgage payments.
Third, your interest rate might be reduced to 4%. Over a 30-year mortgage term, this 2% reduction could save you a very substantial amount of money.
Fourth, your mortgage payments might be reduced to about $1400 per month. All you have to do now is make your future payments at the reduced rate of $1400 per month on time
What if you can't afford to pay back the mortgage arrears or you don't qualify for a loan modification? Well, Chapter 13 can still help you. When you file a successful Chapter 13, the filing of the case will usually stop the sheriff's sale from taking place. If you can then set up a plan to pay back your mortgage arrears in monthly installments over a period of 5 years, while you keep making your regular monthly mortgage payments.
If you can't really afford to pay back those arrears over 5 years, there is yet another alternative. You can submit a plan to the bankruptcy court to sell your house, and this will give you an opportunity to hopefully make some money by selling it instead of losing everything when it goes to a sheriff's sale. And here is one more piece of good news. There are times when you can file a Chapter 13 within 10 days after a sheriff's sale and still have the opportunity to save your home. Feel free to call us at 856 696 8300 for more information and details.
Let's say you have a second mortgage on your home, and you owe $50,000 to pay it off. Well, how would you like to totally wipe it out and never have to pay another dollar to the mortgage company? You might be able to do just that if you qualify for what is known as a mortgage cram down. It's actually quite simple. The key is as follows: The payoff on your first mortgage has to be greater than what your home is worth.
Here's a quick real-life example: Let's assume that our client, Joanne, owns her home, and she has two mortgages. The payoff on the first mortgage is $150,000, and the payoff on her second mortgage is $50,000. Let's also assume that Joanne has 20 years of payments left on that second mortgage.
If the property is worth $148,000, she can totally wipe out the $50,000 second mortgage by filing a successful Chapter 13 case. Once she receives her Chapter 13 discharge, Joanne will never have to pay another dollar on that mortgage, and that mortgage lien on her home will be removed.
Furthermore, Joanne's savings are actually going to add up to a lot more than just $50,000, because she will never have made one single payment on the second mortgage from the day her Chapter 13 was filed until the day of her discharge. And if you consider all of the interest she would have had to pay during the 20 years left on her second mortgage, she might be saving well over $125,000.
If you are having trouble making your car payments and your interest rate on your car loan is high, Chapter 13 might be able to save you lots of money on your monthly car payments. When our new clients first come to see us for a free consultation, many tell me that they have been paying 10% or more on their car loans. Some have even been paying as much as 29.99% per year. Well, we sure have good news for our new clients. Chapter 13 can reduce their interest rate to as low as 5% or 6%. We have been able to save some of our clients as much as $10,000 or more when we get their interest rate reduced. And that's not all.
Here is one more benefit. It's called a cram-down. I'll explain what this means by giving you a very simple example. If you have owned your vehicle for more than 910 days (about 2 1/2 years), and its retail value is a lot less than you owe to pay it off, you can save a fortune. Let's say that the retail value of your car is $20,000, and you are paying 20% interest. Let's also assume that the payoff is $30,000. If you qualify for a cram down, you can save about $10,000 on your interest payments. Plus, you will also save another $10,000, by paying the finance company only $20,000 instead of $30,000 over the next 5 years.
So, in this example, you have the opportunity to save $20,000 or more on your car payments. Does anyone want to keep their car and save $20,000?
If the finance company is looking to repo your car, Chapter 13 can immediately stop any efforts to repo your vehicle. Once the case is filed, we contact the finance company and they will usually immediately stop any efforts to repo your vehicle.
If you act quickly after a repo, we can often get the finance company to promptly return your vehicle when you file chapter 13. The key is to file the case before the finance company sells your vehicle at the auction. There have recently been some new court cases that give the finance company the right to hold on to the vehicle after a client has filed for bankruptcy, but we have found that the finance companies have generally been cooperative in returning a repossessed vehicle once a Chapter 13 has been filed. Because of these recent court decisions, if you have a repossession before we file for chapter 13 for you we expect we will call your vehicle finance company to get their assurance that they will voluntarily return your vehicle soon after we file your case
Once we get your vehicle back for you, we can often reduce your monthly payments, we can often reduce your interest rate, and you may be eligible for a cram-down. So, you not only get your vehicle back, but you are also magically up to date on your payments, your future payments could be a whole lot less than they were before you filed your case, and if you are eligible for a cram down, we might be able to substantially reduce your payoff to the fair retail vehicle value.
I talk to many clients who have gotten Title Loans in Delaware, and some of them are being charged as much as (believe it or not) 120% yearly interest. The great thing about chapter 13 is that the Court won't permit this crazy rate of interest, and the Court can reduce the interest rate to about 5% or 6%. So, if your car is worth a lot less than what you owe, and you qualify for a cram down, and you are going to pay back the title loan at 5% or 6% instead of 120%, you are going to save a whole lot of money on your debt to the title loan company.
Remember the example about the car cram down that requires that you own the car for 910 days? Well, that 910 day time period does not apply to investment property. So, let's say you own a second home, or a rental property, or some other investment property, and that property is worth a lot less than what you owe to pay off the mortgage company. Well, if that's the case, then there's an excellent opportunity for you to significantly reduce the amount you have to pay your mortgage company.
Here's an easy illustration. If you own a rental property at the shore that is worth $200,000, but you owe $300,000 to pay off the mortgage, this cram-down strategy could save you a quick $100,000. In addition, think of all of the interest that you would have been paying over the course of 20 or 30 years. When you total all of that up, you might be saving $200,000 or more over the long term.
There sure are some crazy laws on the books. Did you know that in New Jersey you could own your home free and clear without a mortgage, and you could still lose ownership of your home if you don't pay all of your real estate taxes on time? To me, that sounds crazy and unfair, but that is pretty much what the law is.
Now I don't think you are going to be in serious jeopardy of losing your home if you owe just a few hundred dollars in real estate taxes, but when I have clients come to me, and I find out that they owe $10,000 or more in real estate taxes, well, that could certainly be a time for some concern. But guess what? Here comes Chapter 13 to the rescue again.
If you owe real estate taxes, and you need to stop someone or some company from taking over your ownership of your home, Chapter 13 will give you the opportunity to pay back those taxes over a period of 5 years. That's the great news.
The not-so-great news is that you are going to pay back those real estate taxes at a pretty hefty rate of interest. How does 18% per year sound? I thought so. But that's what the crazy law says.
So, if you can make sure to pay your real estate taxes on time, that's obviously in your best interest. But if for some reason you fall far behind in your real estate taxes, and someone is suing you to take away your ownership of your home, if you act quickly you can rest assured that Chapter 13 will help you pay your tax arrearages back over 5 years, but the interest rate is going to be pretty high.
Chapter 13 will give you the opportunity to pay back court fines to some courts that you owe money to. This can be very helpful in a situation where your driving privilege has been suspended because you have not been able to pay fines on time to several courts. If you consolidate all your court debts to be paid through a Chapter 13 plan, that could go a long way to your getting your driving privilege restored.
If your landlord is trying to evict you because you haven't been able to pay your rent on time, then you need to understand how Chapter 13 works. It's an ideal way to stop the eviction from going forward, but timing is everything. Without going into all of the details at this point, my strong suggestion is that if your landlord is taking you to court because you haven't paid your rent on time, and you want to have the best chance to stay where you are, please speak to a lawyer before you have that court hearing scheduled. If you file Chapter 13 before that court hearing is scheduled, you can probably get 12 to 18 months to pay back your rent arrears. If you don't file Chapter 13 before that court hearing is scheduled, things will probably get a lot more complicated for you, so don't say I didn't warn you.
Many potential new clients who come in for a free consultation are very worried because they owe income taxes to the IRS and the State of New Jersey. They fear that they will get a tax lien filed against them, that their bank accounts will be frozen, that their wages will be attached, that they will never get a tax refund, and who knows what else.
Their fears are often turned into hope and sometimes even joy when I tell them that many income taxes that are more than 3 years old can be totally wiped out and discharged by filing for bankruptcy.
But income taxes that are less than 3 years old can present a bit of a challenge. Yes, a bit of a challenge, but not a gigantic challenge, because I tell my clients that they don't have to worry about future interest and they don't have to worry about future penalties, and they don't have to worry about frozen bank accounts, wage garnishments, tax liens, never getting a refund, and who knows what else if they quickly file for Chapter 13.
That's because Chapter 13 gives clients the absolute right to pay back only the income taxes that can't be wiped out in Chapter 13. And the good news is that when those taxes are paid back, you can often get five years to pay them back, and you will pay them back without any further interest or penalties.
In addition, neither the IRS nor the State of New Jersey will be able to garnish your wages, freeze your bank account, or file a new tax lien against you. And when it comes to getting future tax refunds, as long as you do what you're supposed to be doing in Chapter 13, New Jersey and the IRS should be sending you your refunds on a timely basis.
If the only thing that has been keeping you from getting your driver's license is the fact that you haven't been able to pay those outrageous surcharges, well the good news is that filing Chapter 13 or Chapter 7 will usually get your driver's license restored. You will probably have to pay at least a $100 restoration fee, and you might have to take that driving test again, depending on how long you have been suspended. By now you should be realizing what a powerful tool Chapter 13 can be. But there are still other things you can accomplish. So, let's give you just one more example.
Imagine taking advantage of all of the benefits set forth in the paragraphs set forth above, and, in addition to all of those benefits, you can also totally wipe out and eliminate all of your unsecured debts. This includes wiping out:
Credit card debt
Old income taxes that qualify for discharge
Money you owe to lawyers for legal fees
Personal loans, such as unsecured debts owing to credit unions and places like One Main Financial, Mariner Finance, Prosper, and Avant.
Surcharges on your driver's license. And if your license is suspended solely due to nonpayment of surcharges, you can get your driving privilege restored.
Debts owing on bail bonds.
Stop wage garnishments.
Stop lawsuits already in progress, and stop people from suing you in the future on old debts.
Get money released from frozen bank accounts.
Utility bills, and get your service turned back on if they have shut it off.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
Remember that one of the main purposes of Chapter 13 is to help you get a fresh financial start, put the past behind you, and deal with your bills in the way that is best for you. Chapter 13 gives you an opportunity to catch up on bills that you have to pay, and wipe out bills that you can legally wipe out.
There is no shame or stigma attached to filing a Chapter 13. Usually, about 1 million people file for bankruptcy every year. It might be a lot more people in 2021. If done properly, bankruptcy can be a very positive experience that will help you have a much brighter financial future.
Obviously, there is a lot of financial stress when you've got a lot of bills. We'll be happy to teach you how to stop the bill collectors from calling you, writing to you, and harassing you. Keep in mind that there is plenty of light at the end of the tunnel. In most situations, our clients get substantial debt relief, and they also obtain substantial stress relief.
To file a Chapter 13 bankruptcy, you will pay a Bankruptcy Court filing fee, a credit counseling fee, and our law firm's attorney fee. Please call 856-696-8300 for current fees associated with the filing of a Chapter 13 bankruptcy.