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| Stop Foreclosure Bankruptcy Chapter 13 |
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How to Stop Foreclosure by Filing Bankruptcy Chapter 13
Chapter 13 will immediately stop foreclosure proceedings, it
allows for debt consolidation that includes all outstanding
mortgage arrears, car loan arrears, outstanding credit cards
balances and medical expenses. All of your debts, secured
and unsecured, must be included in the filing. This process is
not to be confused with a debt reduction or debt
consolidation program.
The consolidated debt amount is not reduced, but it is
interest free. The amount must be paid over a timeframe that
generally ranges from 3 to 5 years. The consolidated amount
for unsecured debt (credit cards, medical expenses, etc.)
cannot exceed approximately $308,000. Secured debt
(mortgages, vehicle loans, etc.) cannot exceed approximately
$923,000.
allows for debt consolidation that includes all outstanding
mortgage arrears, car loan arrears, outstanding credit cards
balances and medical expenses. All of your debts, secured
and unsecured, must be included in the filing. This process is
not to be confused with a debt reduction or debt
consolidation program.
The consolidated debt amount is not reduced, but it is
interest free. The amount must be paid over a timeframe that
generally ranges from 3 to 5 years. The consolidated amount
for unsecured debt (credit cards, medical expenses, etc.)
cannot exceed approximately $308,000. Secured debt
(mortgages, vehicle loans, etc.) cannot exceed approximately
$923,000.
| Learn How to Stop Foreclosure With Chapter 13 Bankruptcy |
There are two primary qualifications to be met for filing for Chapter 13 protection.
First, you must be employed or have a consistent source of income. You must be able to verify this information to
the court. Sources of income include wages, income from self employment, social security benefits and alimony and
child support.
Second, you must have disposable income available beyond your basic monthly expenses that can be applied to the
amount covered by the bankruptcy. If your basic monthly expenses exceed your monthly income, you have no
disposable income to apply to the past due amounts and you will not qualify for this type of bankruptcy protection.
You must be able to pay all your current monthly bills and have an amount left over to apply to the amount in
arrears.
Who is Eligible for Bankruptcy Chapter 13
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as
long as the individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650. 11
U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A
corporation or partnership may not be a chapter 13 debtor. Id.
An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy
petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court
or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which
they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or
any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling
from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There
are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that
there are insufficient approved agencies to provide the required counseling. If a debt management plan is
developed during required credit counseling, it must be filed with the court.
First, you must be employed or have a consistent source of income. You must be able to verify this information to
the court. Sources of income include wages, income from self employment, social security benefits and alimony and
child support.
Second, you must have disposable income available beyond your basic monthly expenses that can be applied to the
amount covered by the bankruptcy. If your basic monthly expenses exceed your monthly income, you have no
disposable income to apply to the past due amounts and you will not qualify for this type of bankruptcy protection.
You must be able to pay all your current monthly bills and have an amount left over to apply to the amount in
arrears.
Who is Eligible for Bankruptcy Chapter 13
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as
long as the individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650. 11
U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A
corporation or partnership may not be a chapter 13 debtor. Id.
An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy
petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court
or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which
they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or
any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling
from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There
are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that
there are insufficient approved agencies to provide the required counseling. If a debt management plan is
developed during required credit counseling, it must be filed with the court.
Debt payments are made through the court system and not directly to the creditors. Filing for bankruptcy will stop
mortgage foreclosure proceedings immediately and must be done prior to the lender starting these procedures.
Filing will also stop unsecured creditors from continuing or starting collection procedures
mortgage foreclosure proceedings immediately and must be done prior to the lender starting these procedures.
Filing will also stop unsecured creditors from continuing or starting collection procedures
| What is the New Bankruptcy Law Mean Test |
With the new bankruptcy law in effect since October 17, 2005, there is a lot of confusion with regard to the new
"means test" requirement. The means test will be used by the courts to determine eligibility for Chapter 7 or
Chapter 13 bankruptcy. The purpose of this article is to explain in plain language how the means test works, so that
consumers can get a better idea of how they will be affected under the new rules.
When most people think of bankruptcy, they think in terms of Chapter 7, where unsecured debts are normally
discharged in full. Bankruptcy of any variety is a difficult ordeal at best, but at least with Chapter 7, a debtor was
able to wipe out their debts in full and get a fresh start. Chapter 13 is another story, since the debtor must pay back
a significant portion of the debt over a 3-5 year period, with 5 years being the standard under the new law.
Prior to the advent of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," the most common
reason for someone to file under Chapter 13 was to avoid the loss of equity in their home or other property. And
while equity protection will continue to be a big reason for people to choose Chapter 13 over Chapter 7, the new
rules will force many people to file under Chapter 13 even if they have NO equity. That's because the means test will
take into account the debtor's income level.
To apply the means test, the courts will look at the debtor's average income for the 6 months prior to filing and
compare it to the median income for that state. For example, the median annual income for a single wage-earner in
California is $42,012. If the income is below the median, then Chapter 7 remains open as an option. If the income
exceeds the median, the remaining parts of the means test will be applied.
This is where it gets a little bit trickier. The next step in the calculation takes income less living expenses (excluding
payments on the debts included in the bankruptcy), and multiplies that figure times 60. This represents the amount
of income available over a 5-year period for repayment of the debt obligations.
If the income available for debt repayment over that 5-year period is $10,000 or more, then Chapter 13 will be
required. In other words, anyone earning above the state median, and with at least $166.67 per month of available
income, will automatically be denied Chapter 7. So for example, if the court determines that you have $200 per
month income above living expenses, $200 times 60 is $12,000. Since $12,000 is above $10,000, you're stuck with
Chapter 13.
What happens if you are above the median income but do NOT have at least $166.67 per month to pay toward your
debts? Then the final part of the means test is applied. If the available income is less than $100 per month, then
Chapter 7 again becomes an option. If the available income is between $100 and $166.66, then it is measured
against the debt as a percentage, with 25% being the benchmark.
In other words, let's say your income is above the median, your debt is $50,000, and you only have $125 of
available monthly income. We take $125 times 60 months (5 years), which equals $7,500 total. Since $7,500 is less
than 25% of your $50,000 debt, Chapter 7 is still a possible option for you. If your debt was only $25,000, then your
$7,500 of available income would exceed 25% of your debt and you would be required to file under Chapter 13.
To sum up, first figure out whether you are above or below the median income for your state - median income
figures are available at http://www.new-bankruptcy-law-info.com. Be sure to account for your spouse's income if you
are a two-income family. Next, deduct your average monthly living expenses from your monthly income and multiply
by 60. If the result is above $10,000, you're stuck with Chapter 13. If the result is below $6,000, you may still be able
to file Chapter 7. If the result is between $6,000 and $10,000, compare it to 25% of your debt. Above 25%, you're
looking at Chapter 13 for sure.
Now, in these examples, I have ignored a very important aspect of the new bankruptcy law. As stated above, the
amount of monthly income available toward debt repayment is determined by subtracting living expenses from
income. However, the figures used by the court for living expenses are NOT your actual documented living
expenses, but rather the schedules used by the IRS in the collection of taxes.
A big problem here for most consumers is that their household budgets will not reflect the harsh reality of the IRS
approved numbers. So even if you think you are "safe," and will be able to file Chapter 7 because you don't have
$100 per month to spare, the court may rule otherwise and still force you into Chapter 13. Some of your actual
expenses may be disallowed.
What remains to be seen is how the courts will handle cases where the cost of mortgages or home rentals are
inflated well above the government schedules. Will debtors be expected to move into cheaper housing to meet the
court's required schedule for living expenses? No one has any answers to these questions yet. It will be up to the
courts to interpret the new law in practice as cases proceed through the system.
"means test" requirement. The means test will be used by the courts to determine eligibility for Chapter 7 or
Chapter 13 bankruptcy. The purpose of this article is to explain in plain language how the means test works, so that
consumers can get a better idea of how they will be affected under the new rules.
When most people think of bankruptcy, they think in terms of Chapter 7, where unsecured debts are normally
discharged in full. Bankruptcy of any variety is a difficult ordeal at best, but at least with Chapter 7, a debtor was
able to wipe out their debts in full and get a fresh start. Chapter 13 is another story, since the debtor must pay back
a significant portion of the debt over a 3-5 year period, with 5 years being the standard under the new law.
Prior to the advent of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," the most common
reason for someone to file under Chapter 13 was to avoid the loss of equity in their home or other property. And
while equity protection will continue to be a big reason for people to choose Chapter 13 over Chapter 7, the new
rules will force many people to file under Chapter 13 even if they have NO equity. That's because the means test will
take into account the debtor's income level.
To apply the means test, the courts will look at the debtor's average income for the 6 months prior to filing and
compare it to the median income for that state. For example, the median annual income for a single wage-earner in
California is $42,012. If the income is below the median, then Chapter 7 remains open as an option. If the income
exceeds the median, the remaining parts of the means test will be applied.
This is where it gets a little bit trickier. The next step in the calculation takes income less living expenses (excluding
payments on the debts included in the bankruptcy), and multiplies that figure times 60. This represents the amount
of income available over a 5-year period for repayment of the debt obligations.
If the income available for debt repayment over that 5-year period is $10,000 or more, then Chapter 13 will be
required. In other words, anyone earning above the state median, and with at least $166.67 per month of available
income, will automatically be denied Chapter 7. So for example, if the court determines that you have $200 per
month income above living expenses, $200 times 60 is $12,000. Since $12,000 is above $10,000, you're stuck with
Chapter 13.
What happens if you are above the median income but do NOT have at least $166.67 per month to pay toward your
debts? Then the final part of the means test is applied. If the available income is less than $100 per month, then
Chapter 7 again becomes an option. If the available income is between $100 and $166.66, then it is measured
against the debt as a percentage, with 25% being the benchmark.
In other words, let's say your income is above the median, your debt is $50,000, and you only have $125 of
available monthly income. We take $125 times 60 months (5 years), which equals $7,500 total. Since $7,500 is less
than 25% of your $50,000 debt, Chapter 7 is still a possible option for you. If your debt was only $25,000, then your
$7,500 of available income would exceed 25% of your debt and you would be required to file under Chapter 13.
To sum up, first figure out whether you are above or below the median income for your state - median income
figures are available at http://www.new-bankruptcy-law-info.com. Be sure to account for your spouse's income if you
are a two-income family. Next, deduct your average monthly living expenses from your monthly income and multiply
by 60. If the result is above $10,000, you're stuck with Chapter 13. If the result is below $6,000, you may still be able
to file Chapter 7. If the result is between $6,000 and $10,000, compare it to 25% of your debt. Above 25%, you're
looking at Chapter 13 for sure.
Now, in these examples, I have ignored a very important aspect of the new bankruptcy law. As stated above, the
amount of monthly income available toward debt repayment is determined by subtracting living expenses from
income. However, the figures used by the court for living expenses are NOT your actual documented living
expenses, but rather the schedules used by the IRS in the collection of taxes.
A big problem here for most consumers is that their household budgets will not reflect the harsh reality of the IRS
approved numbers. So even if you think you are "safe," and will be able to file Chapter 7 because you don't have
$100 per month to spare, the court may rule otherwise and still force you into Chapter 13. Some of your actual
expenses may be disallowed.
What remains to be seen is how the courts will handle cases where the cost of mortgages or home rentals are
inflated well above the government schedules. Will debtors be expected to move into cheaper housing to meet the
court's required schedule for living expenses? No one has any answers to these questions yet. It will be up to the
courts to interpret the new law in practice as cases proceed through the system.