Chapter 13 bankruptcy is one type of bankruptcy relief available to Utah residents under the United States Bankruptcy Code. If some of the following apply to your situation, then you should talk to a Utah Chapter 13 Bankruptcy Attorney, (like me!) about your options:
- You are behind on your mortgage payments.
- You have a second mortgage, or a home equity line of credit (HELOC), and are struggling with debt.
- Your household income is above the median income for Utah. (The median income changes, at the time of writing this post, it is around 52k annually for a one-person household)
- You have some equity in high-value assets such as real property, or vehicles.
- You are facing a foreclosure, or a wage garnishment.
- You are employed, but simply not bringing in enough money to keep up with debts.
How does Chapter 13 Bankruptcy work?
Chapter 13 bankruptcy is a type of bankruptcy in which your assets are not liquidated. Instead, you enter a monthly payment plan, known as a “Chapter 13 Plan”, which pays back your secured debts and a portion of your unsecured debts over a period of between 3 and 5 years? After this period, you can stop making monthly payments, and any remaining debts are discharged!
How can I tell how long my plan will last for?
The length of your Chapter 13 plan is determined by your income, and your budget. If your current monthly income (defined as your average monthly income over the 6 months prior to your bankruptcy filing) is below Utah’s median income, then your plan length can be as short as 3 years, but you can elect spread your payment amounts out more by taking up to 5 years if you wish to.
If your current monthly income is above the Utah’s median income, then your plan must be 5 years in length.
How do I know how much my payments will be?
Calculating your chapter 13 plan payments is very complicated. I hate to give you the attorney line that “you need to have a qualified attorney help you”, but in this area of the law it is true. Roll your eyes if you’d like, but the truth is there are many factors that affect the amount of your plan payment, and they are too complicated for someone who doesn’t have experience with bankruptcy to handle correctly.
Technically, Chapter 13 plan payments can be as low as $1, although it’s hard to imagine that would ever happen. They can also be as much as thousands of dollars per month. Most chapter 13 plan amounts are between $250 and $500. But it really depends on your situation. Here are some factors that affect your payment amount:
- The amount of arrears on your mortgage
- Disposable income in your budget
- The value and equity you have in assets like houses and cars
- The amount of unsecured debt you have
- Your liquidation analysis (something you really need to discuss with your attorney)
- Whether you are paying your debts “in the plan”, or “outside of the plan”
Why Chapter 13 instead of Chapter 7?
The decision between filing Chapter 7 bankruptcy and Chapter 13 bankruptcy depends entirely on your situation. For some people Chapter 7 is best, for others Chapter 13 is the better option. Again, I hate to say it, but talk to an attorney about this! It’s not a decision you want to make without all the information. That being said, here are some situations in which Chapter 13 tends to be better:
- You have equity in a house or car(s) that exceed the exemption amounts for those items, and you don’t want to lose them.
- You are facing foreclosure.
- You have a second mortgage. (Hint: it can be stripped! One HUGE advantage of Chapter 13 bankruptcy)
- You make more than the median income for Utah. (Hint: you may not qualify for Chapter 7 bankruptcy)
- You do not have a lump sum of money to pay an attorney fee and filing fee up front.
What happens when I decide to file bankruptcy with a Utah chapter 13 bankruptcy attorney?
- Step One: find a great attorney who has lots of experience with Chapter 13 bankruptcy, and takes a lot of pride in his work and his client’s satisfaction. Make sure that attorney is able to immediately relieve the stress and anxiety you’ve been facing due to your struggles with debt and creditors. Might I suggest myself…
- Step Two: you will have a consultation with this attorney, and provide the necessary financial information. Your petition will be drafted and filed. If you’ve chosen your attorney wisely, this process will be simple and painless.
- Step Three: Make your first Chapter 13 Plan Payment. It will be due 30 days after filing.
- Step Four: attend the First Meeting With Creditors, or “341 Meeting”.
- Step Five: If you’ve chosen your attorney wisely, he will make sure your Chapter 13 Plan is confirmed by the Bankruptcy Court.
- Step Six: continue to make your monthly payment plans. You may also have to contribute a portion of your tax refunds each year.
- Once your plan payments are complete, you will receive a discharge, and your bankruptcy case will be closed, SUCCESS!
If you have questions about Chapter 13 bankruptcy in Utah, or other bankruptcy and consumer debt questions, please feel free to give us a call!