Done properly, chapter 13 provides certain above-median wage earners—and others with special considerations, often relating to a mortgage—with debt relief.
A Good Lawyer Saves You Money
Chapter 13 analysis starts by carefully calculating your income and expenses to arrive at a realistic plan payment you can afford. For instance, you can exclude income received pursuant to the Social Security Act from your income that must be dedicated to the plan. You want a thorough lawyer who pays attention to detail and who is available to consult with you—not an assistant who doesn’t know the law. Affordability is important, since a majority—about 57% according to one study by the Chicago Fed.—of chapter 13 cases do not result in discharge, but are dismissed. This ultimately costs you money because you’ve paid an attorney and made plan payments, but received no meaningful bankruptcy relief beyond the automatic stay.
A skillfully crafted plan and aggressive representation save you money (as by accelerating secured debt repayment in the plan at the expense of unsecured creditors).
Finally, chapter 13 has certain powerful advantages over chapter 7:
- strip off wholly unsecured mortgages on debtor’s principal residence;
- modify mortgage loan on the debtor’s principal residence;
- cramdown of auto loans, and mortgage loans on real property not the debtor’s principal residence (i.e., investment property);
- catch up on arrears through the plan (e.g., cure deficiencies and thereby avert or exit foreclosure);
- automatic stay protection for codebtors on consumer debt (11 U.S.C. § 1301);
- special preferential treatment as to dischargeability of certain tax claims vis-à-vis chapter 7;
- retain property that would be subject to liquidation in a chapter 7 case; and
- eligibility for a discharge when a chapter 7 discharge remains unavailable by reason of a discharge received in a prior case.
