THE FIFTEEN MOST-ASKED QUESTIONS ABOUT CHAPTER 13 BANKRUPTCY

1. Q: What is Chapter 13?
A: A section of the United States Bankruptcy Code that allows individuals with regular income propose a plan to re-pay creditors.

2. Q: Can Chapter 13 stop a house foreclosure?
A: Yes, and it also stops lawsuits, wage garnishments and other forms of debt collection.

3. Q: Once a house foreclosure is stopped by Chapter 13, what happens with the mortgage?
A: You begin to make regular monthly mortgage payments again “outside” the Chapter 13 plan. The arrears/back payments are paid re-paid over the life of the Chapter 13 plan over a period of 3 to 5 years.

4. Q: What about other debts?
A: You make a monthly payment to a trustee, who then pays off back payments on the mortgage, car loan and other debts, such as credit cards and taxes. You do not pay off the credit cards or taxes yourself.

5. Q: How long to the trustee payments last?
A: From 36 to 60 month, depending on what you can reasonable afford and how much debt has to be paid re-paid.

6. Q: Does the mortgage company have to agree to my filing a Chapter 13 bankruptcy?
A: No. As long as the plan to reinstate the mortgage is within legal limits (and this is why legal representation is needed), the mortgage company has little say in the matter.

7. Q: Why Chapter 13 and not Chapter 7?
A: Most mortgage companies and banks will allow you to reinstate your mortgage only if you pay all of the back payments at once. If you cannot afford to do that, Chapter 13 give you a chance to pay over a period of years. Chapter 7 does not give you this chance to repay and retain your property as Chapter 13 does.

8. Q: What if I am behind on a car loan?
A: Like a home mortgage, car loan defaults can be cured under Chapter 13.

9. Q: Are there any debt limitations for a Chapter 13?
A: Yes. To be eligible to file under Chapter 13 of the bankruptcy code, you cannot have more than $871,550.00 in secured debt (mortgage/car loans) and $290,525.00 in unsecured debt (credit cards). If you have more than that, you should consult a lawyer about Chapter 11 or other options.

10. Q: If I file Chapter 13 and later decide I want to sell my house, can I?
A: Absolutely.

11. Q: Will Chapter 13 ruin my credit?
A: If you are behind on your bills and mortgage, or your house is in foreclosure, your credit has already been affected. Chapter 13 can let you save your house and pull yourself out of the financial mess and put you back on a road to financial rehabilitation.

12. Q: Someone contacted me and told me that they would lend me money or refinance my mortgage so that I would not have to “go bankrupt”. Is refinancing not a better option?
A: It is, if you do not mind paying ten points plus 18% (or more) interest. Also, ask the lender if there is a “balloon” payment. If there is a balloon payment, ask the lender how much the payment will be, when it will become due and where are you suppose to get the money to pay it. If you want to be absolutely satisfied, ask them for the names and telephone number of five (5) people in your area who legitimately refinanced balloons coming due on their loans in the past year. Then call the people up and ask them if they were satisfied with the lender’s service.

13. Q: An investor told me that he’d buy my house so I would not have to “go bankrupt”. What is wrong with that route?
A: Nothing, if you want to sell your house for less than it’s worth. Find out exactly how much money you will walk away with from the deal, and ask: with this money and my present credit rating, will I be able to buy another house or find someone who will rent to me? Chances are it is better to hang on to your current house.

14. Q: Is there a time limit to filing a Chapter 13?
A: It is best to file a Chapter 13 before a foreclosure judgment is entered. A foreclosure judgment may be entered soon if you have already received a foreclosure summons and complaint from the Sheriff or in the mail. It is best to call a lawyer fast if this has occurred. Chapter 13 will be of a little less use if you file after a foreclosure judgment is entered, and probably of very little or no use if the Sheriff has sold your house at a foreclosure sale more than ten days ago.

15. Q: How do I find out more?
A: Call the Law Offices of Jae Y. Kim at (201) 218-5558 to schedule an appointment. When you come, bring copies of your and your spouse’s most recent pay stub, bills, lawsuit papers and other documents related to your finances and mortgage.