Waco Chapter 13 Bankruptcy Attorney

What is the Difference Between Chapter 13 and Chapter 7?

Chapter 13 is a type of case in which you are in an active bankruptcy case for three to five years. You cannot purchase assets are incur debts for that entire period. Your wages and income tax refunds are garnished to repay your creditors for three to five years. Another bankruptcy attorney, the Chapter 13 Trustee, is paid a 10% commission on each payment you make to your creditors. You must report any income changes during the entire three to five-year period so that the Trustee can move to increase your monthly wage garnishment. Chapter 13 is about financial prison.

Texas is a non-garnishment state. That means most creditors, excluding child support, student loans, taxes, and some out-of-state creditors, cannot garnish your wages. However, when you file a Chapter 13 bankruptcy case in Texas, you ask a federal judge to garnish your wages to pay your creditors even though you live in a non-garnishment state.

Erin uses Chapter 13 as a last resort. She will attempt to find all other viable alternatives, including alternatives available under non-bankruptcy law, to address your financial problems. However, if someone has told you that Chapter 13 is the only way to manage your financial situation, don't hesitate to contact Erin for a free, virtual initial consultation to discuss your options.

Is Chapter 13 the Only Option to Retain My Home if I am Behind on My Mortgage and Facing Foreclosure?

No. If you file Chapter 13 to save your home, your mortgage payments will increase, not decrease, making it more probable that you may lose your home. This is because the Chapter 13 Trustee makes your mortgage payments through wage garnishment and charges a 10% commission on each monthly mortgage payment he makes for you. For instance, if your monthly mortgage payment is $1,000.00 and you file a Chapter 13 case, your mortgage payment will be $1,000.00 plus the 10% commission resulting in a new mortgage payment of $1,100.00. Additionally, all your past due fees, plus interest plus another 10% commission to the Chapter 13 Trustee, are garnished from your wages. Therefore, a typical client with a house payment of $1,100.00 can see their monthly mortgage increase to $2,500.00 or $3,000.00 in a Chapter 13 case.

Therefore, Erin tries every alternative other than filing a Chapter 13 case to save homes for clients that are delinquent on their mortgage payments. She files Chapter 7 cases to stop the foreclosure and applies for a home loan modification to cure her clients= late mortgage payments. In those modification applications, she also requests and obtains reductions in mortgage interest rates and extensions of the term of the mortgages to reduce her clients= mortgage payments rather than increasing them through a Chapter 13 bankruptcy case filing.

If someone has told you that Chapter 13 is the only way to retain your home, don't hesitate to get in touch with Erin Baker Shank for a free, virtual initial consultation to get a second opinion from an attorney with four decades of experience in bankruptcy law. Erin practices bankruptcy law exclusively and is exceptionally qualified to represent you and address your financial challenges. 

Chapter 13 Eligibility Rules

Unfortunately, Chapter 13 is not an option for everyone. When you file your bankruptcy petition, you must be able to demonstrate that you meet the following requirements to be considered eligible:

• You must earn a regular income.
• You must be current on filing your taxes.
• You must not have more than $2,750,000.00 of debt (including your home loan)
• You must not have received a discharge for a Chapter 13 case filed within the past two years or a Chapter 7 case filed within the past four years.

Chapter 13 May Not Be Your Best Option

Chapter 13 is not the best option for most people with financial problems. It is a three to five-year wage and income tax refund garnishment. If you are considering a Chapter 13 bankruptcy, there are possible alternative ways to handle your financial situation.

If you have decided to pursue a Chapter 13 bankruptcy, speak with bankruptcy attorney Erin Baker Shank, and get a second opinion. Erin may be able to develop a plan that gets the results you want without the negatives of a Chapter 13 case. However, before committing to a three to a five-year active bankruptcy case, ensure you have explored all of your alternatives!

Dismissal and Discharge Under Chapter 13 – What’s the Difference?

Under Chapter 13, your case may be dismissed or discharged. It is important that you understand the difference:

• Dismissal: A dismissal usually occurs when the court throws a case out for several reasons. The vast majority of Chapter 13 cases are not successful and result in dismissal. This results in a bankruptcy filing appearing on your credit report. However, you still owe all your creditors because your case was dismissed, not discharged.
• Discharge: A debtor receives a Chapter 13 discharge only if they make all of the Chapter 13 plan payments over the three to five-year plan. Your case is dismissed if you don=t surrender virtually all of your income tax refunds to the Trustee during that period. If you are not current on all of your secured debt when you make your final Chapter 13 Plan, you will not be discharged from your debts. If you have student loans, they are not paid during Chapter 13. Your student loan is more significant when you exit Chapter 13 because default interest rates on those student loans continue. At the same time, you pay the rest of your creditors in your Chapter 13 case. A Chapter 13 discharge is tough to achieve because people's financial situations change over three to five years - they lose jobs, get divorced, get sick, etc. This is why Chapter 13 debtors receive a discharge much less frequently than individuals who file Chapter 7 cases in which a release is almost always granted. This is why Erin Shank points to Chapter 13 bankruptcy cases for her clients as a last resort.