Filing For Chapter 13 Bankruptcy in Cape Cod, Massachusetts
Unlike a Chapter 7 Bankruptcy where many of your debts are discharged completely in a relatively short amount of time, a Chapter 13 Bankruptcy debtor will pay back all or a portion of debts owed over a 3 to 5 year period depending on certain factors. In some instances, a person’s only option is to file a Chapter 13 Bankruptcy if it is determined that due to the high amount of their income, they have the means to pay back a portion or all of certain debts. After we review all of your financial records, we may determine that due to the amount of income you currently have, that you are not entitled to file a Chapter 7, but must instead file a Chapter 13. This is due to what the United States Bankruptcy Code calls the “means test”. We calculate your income and expenses based on the guidelines of the Bankruptcy Code and if after the calculations are made it is determined that you have remaining disposable income, then that money will be sent to a trustee to distribute to your creditors over a period of time. Put simply, if after our calculations it is determined that you have $200 dollars a month remaining, and you are to pay that amount monthly over a period of 5 years, you will have sent a trustee around $12,000 dollars (60 months x $200 per month). If in this example you had $24,000 total debt, owed to say credit cards, and this was your only debt listed in your bankruptcy, the creditors would be getting half of their money owed after the five years, upon which time the total debt would be discharged. Please note that there are also certain administrative fees that are also deducted by the trustee, but this gives a basic example of how the process works. Contact us now, so we can get you back on track, safeguarding your assets and your future.
Why Would I Choose to File a Chapter 13 Bankruptcy?
You may be asking yourself, why would I ever choose to file a 13 and wait for 5 years to have my debts discharged if I can get it done so much quicker in a Chapter 7 liquidation. Note, in some cases you have to file a 13 due to the amount of your income, but there is good reason to choose a Chapter 13 in some instances.
The most common reason is to bring your mortgage current by paying the arrears owed over a period of time in a Chapter 13 plan in order to avoid foreclosure. Let’s take our example above, but add to the debts $10,000.00 in mortgage arrears, that is money that is owed to the mortgage company for failing to make the payments. If we use the same calculations above for available income ($200 a month x 60 months = $12,000) to pay the trustee, the trustee will send to the mortgage company payments totaling $10,000.00 over a period of 5 years to bring your mortgage current. As long as you make those payments to the trustee, and stay current on all future payments due the mortgage company, you will not go into foreclosure and you will keep your home.
So what about the other $2000 dollars left that you sent the trustee. That money will now be distributed to your remaining unsecured creditors (the credit cards). Of course now, they will only receive a much smaller portion over that period of 5 years, ($2000/$24,000 = around 8.3% of what was owed). The best thing is that the result is the same, your debts are discharged and you get the Fresh Start that you are entitled to. Contact us now, so we can get you back on track, safeguarding your assets and your future.
Can I Really Get Rid of that Second Mortgage?
If filing a Chapter 13 is in your future, and the second mortgage to your home is completely underwater, then that debts joins your credit cards and other unsecured debts to share in what is available. Remember, a secured debt is such, because when you borrowed the money, you gave the lending institution rights in and to the property that you purchased with the borrowed funds.
If for example you have a first mortgage for $200,000 and a second mortgage for $50,000, but based on an appraisal of your home, it is only worth $195,000, then your first mortgage is underwater by $5,000 but your second mortgage is completely unsecured. That is, if the bank sold your property today, your second mortgage would receive nothing. Since it is in essence, unsecured, then it will join the rest of the unsecured creditors in receiving a percentage of what was originally owed to them. Again, make the payments to the trustee and that debt along with others is completely discharged in a few years. Contact us now, so we can get you back on track, safeguarding your assets and your future.
What About My Retirement Savings?
Certain provisions in the bankruptcy code do allow you to exempt over a MILLION DOLLARS (1,000,000.00) in retirement savings, provided they meet certain criteria under the Federal Bankruptcy Code. For example, most 401K plans that are ERISA qualified are not considered property of the estate. As such, they are not available for distribution to your creditors.
This brings up one very important point. IF YOU ARE NOW TAKING EARLY DISTRIBUTIONS FROM YOUR RETIREMENT ACCOUNT TO PAY YOUR BILLS, YOU ARE BANKRUPT, AND NEED TO DISCUSS THE POSSIBILITY OF FILING FOR BANKRUPTCY PROTECTION. Besides the fact that you are now being taxed on what were pretax contributions and depending on your age you may also be paying a 10% penalty on those withdrawals, think of how long it took to fund that retirement account. With businesses dropping the amounts of matching contributions to 401K accounts, it is very likely that you will never be able to save that much in your remaining working years.
Congress exempted those funds for a reason, because they do not want persons to become wards of the state. Bankruptcy is supposed to give you a fresh start, but not put you back at the beginning of the game. Stop using the money to pay your bills and call us so we can get you back on track, safeguarding your assets and your future.
We are bankruptcy lawyers covering Southeast Massachusetts Counties of Plymouth, Bristol and Barnstable including Cape Cod and the islands of Martha’s Vineyard and Nantucket, including the following towns and villages: AQUINNAH, BARNSTABLE, BREWSTER, BOURNE, CHATHAM, CHILMARK, DENNIS, EASTHAM, EDGARTOWN, FALMOUTH, HARWICH, HYANNIS, MASHPEE, NANTUCKET, OAK BLUFFS, ORLEANS, PLYMOUTH, PROVINCETOWN, SANDWICH, TISBURY, TRURO, VINEYARD HAVEN, WELLFLEET, WEST TISBURY, YARMOUTH.
DISCLAIMER: The information in this website is not legal advice, nor intended to be a substitute for legal advice. You should consult a bankruptcy attorney for individual and personal advice regarding the specific circumstances and facts of your case. No attorney-client relationship has been created between you and Common Law Associates LLP and no legal advice has been rendered by your use of this site. We are a debt relief agency and assist persons in the filing of bankruptcy under the Federal Bankruptcy Code. All information in this site may be considered advertising under the rule of the Supreme Judicial Court of Massachusetts”