Not only does it require the creditors to stop contacting the debtor, it also protects homes from foreclosures and third parties from legal recourse. Chapter 13 has several advantages for those who are trying to honestly fulfill their obligations.
A Chapter 13 bankruptcy lets you keep your home and avoid a foreclosure as long as you're able to continue making the mortgage payments. If you have fallen behind on your mortgage, you may be able to consolidate the late payments into your Chapter 13 repayment plan. However, you'll still have to pay your regular mortgage payment in order to avoid foreclosure.
Finally, you may not have a choice but to file Chapter 13. Chapter 7 requires that your income be below a certain amount. When you come in for a consultation, we can give you a better idea of whether your income qualifies. Basically, it must be below the median income for your household size as determined by the U.S. Census Bureau.
There are some steps that have to be taken regardless of what type of bankruptcy is being filed, so let us begin there. The Bankruptcy act which enacted new laws in 2005 has forced individuals to do a number of things before filing. First, they must have taken a credit counseling course within six months prior to filing. The course must be approved by the government to count for filing bankruptcy. While some people may find this burdensome, particularly if they have already taken a course for another reason outside of the six month time frame, it is a rule that is in place so that people can find out if there are other more beneficial alternatives to filing bankruptcy.
If an emergency happens and you know you're going to miss a payment, call your lawyer right away. For example, did you recently get fired from work? Let your lawyer know. Was your bank account hacked by identity thieves? Let your lawyer know. Did you get kidnapped by aliens and forgot to put the check in the mail? No matter how far-fetched the scenario may be, the takeaway is that you must always communicate with your lawyer if there is even the slightest possibility a payment could be missed.
You may choose to use either the federal or state exemptions when you file for bankruptcy. For example, in New Jersey, a single person who files for bankruptcy could be exempted from up to $20,000 of equity in his home if he has it, plus miscellaneous costs including broker's fees. Often that number could swell up to $30,000.