Chapter 13 bankruptcy is designed for individuals who have gotten behind on house and/or car payments, or who owe substantial tax debt and need a structured plan of repayment to the IRS or state. Basically, Chapter 13 provides individuals with the opportunity to pay their delinquent house and/or car payments over the period of 3 to 5 years, instead of all at once.
During the term of the Chapter 13 case, the individual must resume making the regular monthly mortgage payments and also make a Chapter 13 Plan payment, a portion of which goes to the mortgage holder(s) to pay down the delinquent payments. If you are delinquent with car payments, this form of bankruptcy allows you to repay the balance of the car note over the period of 3 to five years, regardless of the original term of the note, and may provide for a reduction of the interest rate on the car note.
The filing of a Chapter 13 brings the filer under the protection of the “automatic stay,” which stops all of the following collection actions:
- Collection calls
- Collection letters
- Wage garnishments
- Foreclosure actions
- Repossession actions
- Lawsuits to collect a debt
- Utility shut offs
Filing Chapter 13 stops the foreclosure action on a house, stops the replevin action on a car, and terminates taxing authority wage levies and general creditor garnishment actions. It is designed to give you control over the repayment of your debts.
Before you file a Chapter 13 case, we determine the monthly amount required to be paid into your Chapter 13 Plan and you determine whether you can afford the Plan payment. In the vast majority of our cases, our clients find the monthly Plan payments fit comfortably within their budget without affecting their standard of living.
For individuals who owe substantial tax obligations (commonly self-employed or other small business owners) Chapter 13 offers the opportunity to repay tax debt over a much longer period than the IRS or Wisconsin Dept. of Revenue will allow outside of bankruptcy. In some cases, the Chapter 13 can eliminate tax debt (typically requires that the tax be for a tax period at least 3 years old) and can eliminate penalties and interest on other tax debt.
Chapter 13 is about regaining control of your finances. The entitlements and limitations of this type of bankruptcy are complex. If you have a specific question about what Chapter 13 can do for you, please call our Milwaukee office and ask to speak to an bankruptcy attorney. We proudly serve Ozaukee, Racine, Sheboygan and Waukesha County.
For more detailed information about Chapter 13 bankruptcy, click here.