By: Attorney Ray J. Bulaon

Chapter 13 is the section of the US Bankruptcy Code that allows individuals in the United States to reorganize their finances.  If you are having difficulty paying your debts (credit cards, medical bills, personal loans, taxes, late mortgage payments and property taxes- all kinds of debts) due to insufficient income, there is hope for you.

            We all know how difficult it is to catch up once you start falling behind on debt payments. If you’ve experienced a reduction in income (example: reduced income from employment – or business, if you’re self-employed), Chapter 13 allows you to pay back your creditors over a 3-5 year period based only on the amount of your surplus income every month, not based on how much you owe. In Chapter 13, you also don’t need to worry about losing any assets you may have because you will keep everything and lose nothing. And if you are in business, you will be allowed to continue running your business as usual.

            Any type of bankruptcy filing, including Chapter 13, immediately stops all collection actions against you. That means no more annoying creditor calls, collection letters and no marshals at your door. A lot of people in debt are afraid to even answer their phone or open their mailbox because they don’t know how to respond to bill collectors who are harassing them for payment. 

If you are about to lose your home in foreclosure, Chapter 13 also allows you to keep your home while including all your back mortgage payments in your debt consolidation.  For example, during the pandemic, a lot of homeowners were allowed a temporary forbearance by their lender due to their inability to continue making mortgage payments while their income was reduced. A lot of them are now just finding out that catching up on the missed payments is not as easy as their lender made it sound and they are having trouble working a resolution to address the delinquency. If you are in this situation, Chapter 13 may be a good option for you because it forces the lender to work with you.

Another advantage of Chapter 13 is that you pay zero percent on credit cards and all unsecured debts and in most cases, the amount you owe on all these debts are significantly reduced, sometimes to zero, depending on your income.  Let me explain.

The portion of your unsecured debt (or all of it) that is not paid through your Chapter 13 plan is wiped out at the end of your repayment plan. That means that whatever you’ve paid to the best of your ability will be considered FULL PAYMENT and the remaining balances will be cancelled.

            Once the court approves your proposed Chapter 13 plan, there is nothing more that creditors can demand of you.  They are bound by the terms of the approved plan and cannot ask for more money.  Your bankruptcy attorney can review your monthly living expenses with you, analyze your income and help you propose a realistic payment plan that you can afford. 

            In most cases, Chapter 13 is a far better alternative than trying to pay debts on your own or hiring a debt management company. This is because in Chapter 13, you cannot be sued by your creditors as long as you remain under court protection. And if you are being represented by an attorney, all creditor communications go to your attorney so that you do not have to deal with your creditors directly. Once you are in Chapter 13, you only make one single payment every month and this takes care of all the debts you listed in your bankruptcy. What can be simpler than that?

            If you are in debt and need professional help, don’t be embarrassed in finding out what your options are and asking for legal help. The only way to know if bankruptcy is right for your situation is to consult with a professional who has the knowledge and experience to advise you regarding your options under bankruptcy law.

   For a free consultation and debt analysis, call Toll-Free 1-866-477-7772. NOTE: Due to COVID-19 concerns, I am offering free consultations BY PHONE OR VIDEO to anyone who needs help in dealing with their debt problems.

(None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE  1-866-477-7772).