What is Chapter 13?

Ask Our Ft Worth Bankruptcy Lawyers

If you are about to lose your house or car, a Chapter 13 bankruptcy in Fort Worth might save it. The bankruptcy attorneys of Fears | Nachawati have stop thousands of foreclosures -- but we need at least a week before the sale to file all the documents. Contact us immediately to discuss whether a Chapter 13 bankruptcy can work for you.

How Chapter 13 Works

Chapter 13 bankruptcy is known as the "wage earner's plan" meant for people who make a reasonable income but are overwhelmed by debt and late on house or car payments. The bankruptcy court consolidates all of your debts, and you are put on a strict schedule of payments for 3-5 years. You make payments to a trustee, who then pays your creditors. At the end of that period of time, any remaining debts are "discharged," or wiped clean.

Keeping Your Property

The main advantage of a Chapter 13 over a Chapter 7 bankruptcy is that you get to keep much of your personal property. In Texas, this includes a home and a vehicle for each adult in your household of driving age. It also includes bank accounts, retirement accounts, and other assets that are deemed exempt. (See also Saving Your Home and Car and Protecting Your Personal Property.)

Lower Payments

When going through Chapter 13 bankruptcy, you have to keep making payments. But for many secured debts, which include mortgages, car payments, and anything else that involves collateral, you can reschedule payments so that they are lower each month.

Lien Stripping An Auto Loan In Chapter 13

Chapter 13 of the Bankruptcy Code contains many useful provisions that are not available to Chapter 7 debtors. One of the most useful is the ability to cram-down an over-secured auto loan to the actual market value of the vehicle, and pay the auto loan over the duration of the Chapter 13 bankruptcy plan.

The Bankruptcy Code recognizes that a lien is only secured to the extent of the value of the property. If the amount of the lien is more than the value of the property, the debt is separated into two parts: secured and unsecured. During a Chapter 13, the amount of the loan that exceeds the value of the vehicle can be stripped away.

For instance, if your vehicle is worth $10,000, but the secured auto loan balance is $13,000, the bankruptcy will separate the auto loan into a secured debt of $10,000 and an unsecured debt of $3,000. The secured portion must be paid in full during the Chapter 13 case, and the unsecured $3,000 amount will be paid along with other unsecured creditors (usually pennies on the dollar, if anything).

Another potential benefit to the Chapter 13 debtor is that the contract terms can be modified during the Chapter 13 repayment period. In some cases the repayment period can be lengthened or contract interest rate can be lowered by the bankruptcy court. Changing the contractual terms can make a significant difference in the ability of the debtor to repay the debt.

If you are struggling with debts you cannot pay and own a vehicle that is worth less than you owe, you may be eligible to reduce your principle and your monthly payment on your vehicle loan. Speak with an experienced Fort Worth bankruptcy attorney and discuss how a Chapter 13 bankruptcy can help you reduce your debt and make your finances work for you and your family.

Contact Us

Contact us soon for a consultation with the experienced Fort Worth bankruptcy attorneys of Fears | Nachawati. We can answer your questions and analyze your situation. We maintain office hours 7 days a week and can meet with you in the evenings or on weekends. Flexible payment plans are available.

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We are a Chapter 13 Bankruptcy Firm in Fort Worth, Texas. We help people file for bankruptcy relief under the Bankruptcy Code.