Chapter 13 – a Very Powerful Legal Tool: Save Your Home and Car Reduce Your Mortgage and Your Car Payments

Chapter 13 can be more powerful than Chapter 7 because it gives you an opportunity to deal with additional issues that are not covered by Chapter 7.

Here are some examples of what clients can accomplish in Chapter 13:

1. GET FIVE YEARS TO PAY BACK YOUR MORTGAGE ARREARS. You can stop a sheriff's sale, and pay back your mortgage arrears in monthly installments over the next five years, while you make your regular future mortgage payments on time.

2. REDUCE YOUR MONTHLY MORTGAGE PAYMENTS, LOWER YOUR INTEREST RATE, AND DELAY PAYING BACK THE ARREARS - GET A MORTGAGE LOAN MODIFICATION. You can attempt to work out a deal with your mortgage company that would put all of your arrears at the back end of the mortgage, reduce your interest rate, and reduce your monthly mortgage payment. For example, let's say you are $24,000 behind on your mortgage payments, your interest rate is 6%, your monthly payments are $2000, and you are facing a sheriff's sale.

   If we filed a Chapter 13 for you and obtained a successful loan modification, here is an example of the result we might be able to achieve: First, you would no longer be behind on your mortgage. The $24,000 arrears would be placed at the back end of the mortgage.

   Second, your interest rate might be reduced to 4%. Over a 30-year mortgage, this 2% reduction would save you a whole lot of money.

   Third, your mortgage payments might be reduced to about $1400 per month instead of $2000 per month, and fourth, the sheriff sale would be totally cancelled. You would be classified as completely current on your mortgage payments, and all you have to do is make your future payments of $1400 per month on time.

3. SUBSTANTIALLY REDUCE YOUR CAR PAYMENTS, AND STOP A REPO. If you are having trouble making your car payments and your interest rate is high, we might be able to save you lots of money on your monthly vehicle payments.

   Many of our clients are paying 10% or more on their car loans. We actually have some clients that are paying 29.99% per year interest on their car loans. It's crazy!
   One of the many great benefits many of our clients can receive with a Chapter 13 is to reduce their car interest rate to as low as about 6%, maybe even lower. We have had cases where we have been able to save our clients maybe as much as $10,000 or more on the amount of interest they have to pay on their vehicle loans.

   And here is one more important benefit. It's called a cram down. Here's a simple example. If you have owned your car for more than 910 days (about 2 1/2 years), and your car is worth a lot less than you owe, you might save a fortune. Let's say the retail value of your car is $20,000 and you're paying 20% interest. Let's also assume that you owe the finance company $30,000. If you qualify for a cram down, you might save about $10,000 on your interest payments, and you might save another $10,000, by paying the finance company $20,000 over the next 5 years, instead of the $30,000 you presently owe them. Therefore, you have the opportunity in this example to save $20,000 on your car loan, and to pay a reasonable rate of interest. We have saved lots of clients lots of money by using this cram down strategy.

4. TITLE LOANS. Many of our clients have gotten Title Loans, and some have signed up to pay as much as (believe it or not) 120% interest. The great thing about chapter 13 is that the Court would not permit this crazy rate of interest, and the Court has the power to reduce the interest rate to about 6%. This can save people a fortune. Furthermore, if your car's retail value is less than what you owe to pay off the balance due to the title company, and you qualify for a cram down, wouldn't it be great to stop the repo man and get your car payments reduced by maybe $200 or more per month? This cram down procedure can be used with car loan finance companies and with title loans. The 910 day rule does not apply to title loans. So, any time you can clearly demonstrate a big difference in what you owe and the car's retail value, you can probably get a big cram down reduction on your title loan debt.

5. GET YOUR VEHICLE BACK AFTER A REPO. If you act quickly after a repo, we can often get the finance company to promptly return your vehicle. The key is to file the case before the finance company sells your vehicle at the auction. Once we get your vehicle back for you, we can often reduce your monthly payments, we can often reduce your interest rate, and you may be eligible for a cram down.
   So, you not only get your vehicle back, you are also magically up to date on your payments, and your future payments could be a whole lot less than they were before you filed your chapter 13 case.

6. GET RID OF SECOND MORTGAGES ON YOUR HOME. Let's say you owe $50,000 to pay off a second mortgage on your home. How would you like to totally wipe it out? You might be able to do exactly that if you qualify for a second mortgage cram down. Here is an example. It's really pretty simple. The key is as follows:
   The payoff on your first mortgage has to be greater than what the property is worth.

   Let's assume our client owns a house where the payoff on the first mortgage is $150,000, and she has a second mortgage with a payoff of $50,000. If the property is worth, $145,000, she can totally wipe out the $50,000 second mortgage.
   And her savings are going to add up to a lot more than just $50,000, because if you consider all of the interest she would have had to pay over the 20 or 30 years still remaining on the second mortgage, she might be saving well over $100,000.

7. CRAM DOWN MORTGAGES ON SECOND HOMES AND INVESTMENT PROPERTIES. This strategy can save you a lot of money. Let's say you own a second home or a rental property, and that property is worth a lot less than what you owe to pay off the mortgage balance in full. This provides an excellent opportunity to significantly reduce the amount you have to pay the mortgage company.
   By way of example, if you have a rental property at the shore that is worth $200,000, and you owe $300,000 to pay off the mortgage, this strategy could save you a quick $100,000 plus all of the interest you would have been paying over the course of 20 or 30 years, so you might be saving $200,000 or more over the long term.

8. STOP EVICTION BY YOUR LANDLORD. If your landlord is trying to evict you based on non-payment of rent, my best advice is usually, “file a Chapter 13 right away. The best time to file your case is before the date of your court hearing, and this could give you up to 24 months to pay back the rent arrears that are due, while you continue to live in your home and make regular rent payments on time.”

9. WIPE OUT ALL OF YOUR UNSECURED DEBTS. Imagine taking advantage of all of the benefits set forth in paragraphs 1 through 8 set forth above, and in addition to all of those benefits you can also totally wipe out and eliminate all of your unsecured debts. This includes wiping out:

   1. Credit card debt

   2. Medical bills, including hospital bills, doctor bills, and dental bills

   3. Old income taxes that qualify for discharge

   4. Money you owe to lawyers for legal fees

   5. Personal loans, such as unsecured debts to credit unions and places like One Main Financial, Mariner Finance, Prosper, Best Egg, and Avant.

   6. Surcharges on you driver's license. And, if your license is suspended solely due to nonpayment of surcharges, you can get your driving privilege restored, sometimes even on the same day we file your bankruptcy.

   7. Money owing to social security or unemployment, if you were paid by mistake.

   8. Pay day loans.

   9. Debts owing on bail bonds.

   10. Stop sheriff's sales, stop lawsuits against you, stop wage garnishments.

   11. Get money released from frozen bank accounts.

   12. Utility bills, and get your service turned back on if they have shut it off.

   13. Some of the only things you can't usually wipe out in chapter 13 are court fines or court orders for restitution, child support, alimony, debts incurred as a result of fraud, and student loans. Be aware, however, that there is talk to the effect that we might have future changes in the laws that will permit people to wipe out student loans that presently they cannot wipe out. If you have any questions about wiping out student loans, make sure to speak with us.

DISCLAIMER: We set forth herein results that many people can obtain through a successful bankruptcy. This does not mean, however, that every client can obtain all of the results listed. Every client's case is individually analyzed on its own merits, and if you retain our office to represent you, we will advise you what results we believe we can achieve for you. Call for a Free Consultation.