Chapter 13 Bankruptcy- a Swiss Army Knife of Debt Relief–the path to a brighter future

For individuals who qualify and need it, Chapter 13 Bankruptcy is the ideal solution. It provides a simple, direct and relatively inexpensive means for people to reorganize and restructure their debt. It is much cheaper and simpler than Chapter 11.

Like Chapter 11, in Chapter 13 the Bankruptcy Court approves a Plan which redefines what you owe your creditors. At the end of a three or five year payment period, you are free of all debt except the ones you agree to. Of course, you have to fully pay taxes, and if you want to keep property that is subject to a mortgage, car loan, lease or other secured debt, you will still have those debts to deal with after your bankruptcy, except to the extent you are allowed to modify them.

Here is what you can do using Chapter 13:

Saving your home or real estate and reducing mortgage debt to a manageable level.

1. If your house is worth less than what you owe on the first mortgage, you can remove the second mortgage (called a "strip off"), and instead pay that lender a fraction of what is owed. At the end of your agreed payment plan, you can have the mortgage removed from the title to your home.
2. If the mortgage is for a rental or investment property, you will usually be able to "modify" the loan to force the mortgage lender to accept the market value of the property instead of the full balance owed.
3. The same thing can be done with other secured loans, subject to some exceptions and special rules

Settling up with the tax man

1. While most but not all income, payroll or sales taxes have to paid in full (exceptions are certain older taxes, and most tax penalties) you can pay them back over five years with zero interest.
2. Very often, such taxes that you could discharge because they are too old have become liens on your home and other property because the tax collector has filed a tax lien. Without bankruptcy, you are still stuck paying that lien even after a bankruptcy discharge. In Chapter 13, however, you can "cram down" tax liens to the value of your property. Let’s say you have $100,000.00 in state or federal tax liens for old taxes that without the tax lien could be discharged in bankruptcy, but the total value of all your property, net of other liens, is $20,000.00. You can pay the tax man the $20,000.00 over five years, and when you are done, the tax lien disappears.
3. There are other big tax benefits from any bankruptcy, that apply in Chapter 13.
1. First, there is a "home court advantage". Outside of bankruptcy, disputes with the tax man have to be fought out in Washington, DC or in a tax court, giving the tax man the "home court advantage". The Bankruptcy Code gives bankruptcy courts the ability to hear and decide these issues, in a courthouse that may be much closer to home. This is a definite "home court advantage" for the debtor-taxpayer.
2. Secondly, if you can settle debts outside of bankruptcy for less than the full amount owed, you will usually get hit with a tax bill from what is called "debt-discharge income". In a bankruptcy discharge, this is not the case.

Making lienholders take less than what they are owed
Let’s say that old car is worth $3000.00 but you owe $6000.00 on it. If the car loan was taken out more than 2 ½ years ago, you can "buy back" the car for the $3000.00 plus interest (usually at a lot lower rate than the contract provides for) paid out over a five year period.
For many other secured debts, the same rules can apply.Paying back without interest, and usually less than what you owe

1. Even those cases where the Bankruptcy Code requires full payment of debts, the payout is without interest. Compared with the high interest rates–as much as 28% for credit cards–this can be huge savings.
2. And for most people, a chapter 13 plan pays a small fraction to garden-variety unsecured debts.

A guaranteed plan that creditors have to live with–the road to taking control of your life and a brighter financial future.

1. Many people we seen have tried to negotiate with their creditors. While deals can be made, they are not guaranteed. Each collector wants to extract as much money as they can from you, right now or in a few months. And even if you settle with 7 out of 10 creditors, there is no guarantee that the last 3 will do so on terms you can afford. This leaves you having to consider a bankruptcy anyway.
2. A Chapter 13 Plan, once it is confirmed by the court, fixes all your obligations to all your creditors, once and all. And to get the plan approved, it must be one you can actually do.

The Road to a New Day and a Brighter Future
Our clients who are successful in Chapter 13 (and we have a high success rate because we are careful to craft plans that work for our clients), have taken control of their lives and are on the road to a new day with a brighter financial future. For more information about gaining control of your life and solving financial problems, see our website. Neuner and Ventura-NJ Bankruptcy