Saving your home with a Chapter 13
Joliet Illinois Bankruptcy Lawyers & Attorneys
Saving your home with a Chapter 13
Jesse Barrientes: Well, it would be beneficial for example if you owned a home and you had too much equity in the home in Joliet. We had to show not very long ago we were talking about Chapter 7 and indicating that there’s basically a $15 thousand per individual exemption for the home – you know, for the equity that you have –
David Siegel: That’s the amount that they can keep free and clear while not paying their creditors.
Jesse Barrientes: Exactly.
David Siegel: Okay.
Jesse Barrientes: And very often sometimes people fall into the other category where you know what? They have maybe more. Maybe it’s an older couple or maybe it’s just that they have more equity than that so they’re not an appropriate candidate for a Chapter 7 if we’re just talking about that reason because they just have simply too much equity in the house. But they still want to keep their home. And also, too, with the Chapter 7 you have to be caught up in your mortgage payments or you’ve got to give the house back. One or the other. But with Chapter 13, if you’re behind – it doesn’t matter how far you’re behind, all of that arrearage can go into the kitty. And, you know, to get you out from under that. And so it’s a really, really good tool especially in the climate of the times we have now to provide some relief.
David Siegel: And the important thing to know with Chapter 13 is the person or couple must have available money per month, so their income minus their expenses, there has to be something left over that they can contribute to a Chapter 13 trustee to reorganize their debt. A lot of people don’t have that ability to reorganize because they just don’t have a positive cash flow each month. And those people are better qualified for Chapter 7 fresh start or otherwise liquidating their property if there’s equity like you said. So there is a hurtle they have to get over. They have to have the ability to pay something per month, which is tough.
Jesse Barrientes: Well, yeah, and sometimes you know you see people – unfortunately I see people that are in between. Can’t do a Chapter 7, can’t do a Chapter 13 for the reason that you said. But you know you look at the allowable expenses, and after – any money that’s left over after the allowable expenses, that’s what you have for the plan that you’re going to repay. But the problem though is it’s only one or two things. Either more money – you either make more money or you spend less. And you have to really, really be lean in a Chapter 13, and to kind of do that for three to five years can sometimes really be a challenge.
David Siegel: Right. The most common use of Chapter 13 in Joliet, and we’re seeing it more and more today with the foreclosure crisis, is a home saver case. A case where someone has fallen behind on their mortgage for whatever reason. Maybe they lost their job. Maybe they were ill. Divorced. Some circumstance prevented them from making their mortgage on time and now they’ve corrected that situation. Maybe they’re back to work. Maybe they become healthy. And now they can make the mortgage payment plus put something away towards the arrearage, but the mortgage company is saying no, we want one lump sum payment to catch you up.
Jesse Barrientes: Right.
David Siegel: Chapter 13 basically says mortgage company, you’re going to take it the way we want to pay you over the next three to five years as long as they can pay off all the arrears. And we’re going to make our next regularly scheduled mortgage payment once again after we file our case. Perfect scenario is after three to five years the debtor makes the mortgage payment as they always have. The arrearaged portion is satisfied through the Chapter 13 trustee payment. And they’re out of debt.
Jesse Barrientes: Right. And all is as it should be. But when you look at the other kind of debt that people have along with that, which is pretty good. But this is important to know. We’re just talking about that. Is that in a Chapter 13, unlike a Chapter 7, that the arrearage goes in the kitty and that amount, whatever that is, along with some other stuff which we’ll talk about in a little bit here, is what gets determined, you know what the debt is and how that’s going to get paid back. But when you look at what needs to happen with the trustee, right? With the amount of money that you send in, right, to the trustee. You have to have enough money to pay back your secured creditors, right, 100 percent.
David Siegel: Yes.
Jesse Barrientes: And you have to be able to sustain and pay your mortgage, your first and/or your second, kind of as you go along there. So okay, I owe this amount of money but I’m okay now like you said. So in addition to the plan, I still have to pay my mortgage. But those are part of the allowable expenses that you’re allowed to find out exactly what your plan payment is going to be.
David Siegel: Importantly, a secured creditor is a creditor that is secured by property. That would be a house. That would be a car, jewelry, furniture. It’s a situation where if the person does not make payments, there’s some kind of property or security or collateral that can be taken back. So yes, in a Chapter 13 secured creditors do need to be paid in full. But all the other creditors on the back end – credit cards, medical bills, personal loans, utility bills. Those can be paid sometimes less than 100 percent.
Jesse Barrientes: Even the debt I owe to Uncle Mark and Uncle Dan?
David Siegel: Definitely the debt that you owe to your uncles. If they were foolish enough to lend you money, Jesse, they almost don’t deserve to be paid back even ten percent.
Back to Aurora Illinois Bankruptcy Lawyers & Attorneys
Chapter 7
What’s needed to file a Chapter 7 case?
Stay on creditors during a Chapter 7 case
Mistakes made in a Chapter 7 case
Listing creditors in a Chapter 7 case
Credit counseling classes in a Chapter 7 case
Notice to creditors in a Chapter 7 case
There is life after bankruptcy
Chapter 13
Saving your home with a Chapter 13
Stopping a sheriff sale using Chapter 13
Converting to a different chapter from Chapter 13
