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Chapter 13 Bankruptcy

If you are a homeowner and are interested in applying for a modification of your mortgage loan while you are in bankruptcy, see the “Home Loan Modifications” page on this website.

If, after careful review of your income, your assets, and other important financial information, we determine that (i) you would be ineligible for a Chapter 7 because your household income is too high or that (ii) it would not be in your best interest to file a Chapter 7 because you would run the risk of losing important assets, then we will discuss filing a Chapter 13 bankruptcy instead.

Put simply, in a Chapter 7, if you have non-exempt assets, the trustee will confiscate those assets, sell them, and use the proceeds to pay your creditors. In a Chapter 13, however, you keep your assets and pay back your creditors yourself in monthly payments over the course of a three or five-years, depending on your annul income. A Chapter 13 bankruptcy is, essentially, a federal court-supervised debt-payment plan.

How much will you have to pay your creditors depends on two things: (i) how much you would have to pay in a theoretical Chapter 7, divided, again, by either 36 or 60 monthly payments and (ii) how much "disposable income" you have every month, meaning how much your monthly income exceeds your monthly expenses. Generally speaking, whichever figure is higher, PLUS a 10% trustee handling fee, is what you will have pay back to your creditors every month if you file a Chapter 13. 

The fee for a Chapter 13 will most probably be about $4,500 if you are paying 100% of your unsecured debt through your Chapter 13 payment plan, or $5,000 if you are paying less than 100% of your unsecured debt (not including the court filing fee.) In any case the cost will be made clear to you before we start. 

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