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Category Archives: Chapter 13 Bankruptcy

Can I Purchase a Car While in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy creates a three to five year repayment plan. This gives the debtor the opportunity to reorganize and pay back a portion or all of their debt over time. However, three to five years is a lengthily commitment. While in Chapter 13 bankruptcy you must make an agreed upon monthly plan payment to the bankruptcy trustee and you must ask the bankruptcy court permission to take on new debt while in a Chapter 13.

Can I Purchase a Car While in Chapter 13 Bankruptcy?

You can buy a car while in Chapter 13, with court approval, to provide needed transportation. So long as you meet certain criteria, the court is likely to approve your request for permission to purchase a car during the life of your bankruptcy case.

Because of the length of Chapter 13 bankruptcy cases, it is not uncommon that a debtor’s vehicle will need to be replaced. Perhaps an aging vehicle requires repairs that would cost more than it is worth, or the previous vehicle was totaled in an accident. Things happen, and the bankruptcy court understands this.

If you are in Chapter 13 bankruptcy and find you need to purchase another car, do the following:

  • Shop around for a vehicle. Consider used cars (but new to you!) are often a better deal and less expensive than a brand new car. Look around to see what you can get for a payment you can afford.
    • In our bankruptcy law practice, we have had the Chapter 13 Trustee approve car loans in amounts ranging from $150 per month to $450 per month.
    • Be mindful that your new car payment will be paid outside of the plan and made directly to the lender. It is critical that you only take on a monthly payment that you can afford, while still making your monthly plan payments.
    • There are lenders who will approve car loans to debtors while in bankruptcy, but they may not want to work with you until you have permission from the court. However, it is important to have a clear idea of what you can buy with a monthly payment you can afford. Plus, you need to know if you will need a down payment, and if so, how much.
  • Once you have done the research and preliminary shopping, gather current paystubs (for you and your spouse if you are married) and prepare a realistic budget to ensure you can afford to add a car payment to your present budget.
  • After careful review of your budget, schedule an appointment with your bankruptcy attorney so that the proper paperwork can be filed with the court to ask permission to incur new debt.
    • Understand that if the court approves your request, you must provide the trustee with proof of purchase within 45 days of approval.
    • If you do not follow through with the purchase once approved, your Chapter 13 plan payment will be increased by the amount you would have paid toward the car payment, as your budget demonstrating the monthly payment you could afford is then considered additional disposable monthly income.

The Benefits of Filing Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a powerful tool that can help you save your house, catch up on missed payments, and eliminate unsecured debts, like credit card debt. It requires a three to five year commitment to a monthly payment, but the benefits are vast. We are here to help you understand the process and decide if filing for relief under Chapter 13 is the right choice for you and your family.

Contact us today to schedule a free consultation.

 

The Law Offices of Barbara B. Braziel proudly serves Savannah, Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City, GA.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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Savannah Bankruptcy Attorney

If you are exploring how bankruptcy can help you get out of debt, we invite you to meet with us for a free consultationcontact us on the web or call (912) 351-9000 today!

We are the premiere bankruptcy law firm in Savannah, Georgia. The Law Office of Barbara B. Braziel proudly serves the people of Savannah, GA and the surrounding areas, including Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City.

Relief from Your Financial Burdens

Bankruptcy is a powerful tool that can erase your debts. While choosing to file may be a difficult decision, it may be the best decision for your financial future.

We have been practicing bankruptcy law for over 35 years and often we have met clients who delayed filing until their situation became far worse than it needed to be. In many cases people spent thousands of dollars trying to avoid a bankruptcy that they ultimately needed to file anyway.

Sadly, many of our clients lost assets that they would have been able to keep if they had filed for bankruptcy sooner. Many borrowed against retirement in an attempt to manage their debt and stave off collection. In general retirement accounts are fully protected in bankruptcy. Others took out Home Equity Lines of Credit (HELOC) to pay off some creditors and ultimately risked losing their house to foreclosure.

Powerful and Positive Impacts of Bankruptcy

Our firm has helped thousands of families keep their cars, their homes, and other belongings. Erasing debt, halting all collection action, and protecting your belongings from creditors are just a few of the powerful and positive impacts bankruptcy offers. Bankruptcy can also erase certain older tax debts, give you the opportunity to catch up on missed mortgage or car payments, and can even lien strip away an underwater second mortgage.

Savannah Bankruptcy Attorney

All of us here at the Law Offices of Barbara B. Braziel are committed to helping people get out of debt and gain the financial freedom they deserve. We invite you to learn more about who we are here. If you live in Savannah, GA or the surrounding areas and have questions about your debt relief options, let’s meet for a free consultation.

Please reach out to us at (912) 351-9000 or contact us by filling out this simple web form. Follow us on Facebook for tips on getting out of debt!

 

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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How Chapter 7 Differs from Chapter 13

Chapters 7 and 13 bankruptcy are designed for individuals and families. Both chapters offer many of the same benefits. However, there are significant differences between what these two chapters offer and how they operate.

The “chapters” come from the United States Bankruptcy Code, and the numbers represent the code sections.

Overview of How Chapter 7 Differs from Chapter 13

  • Chapter 7 bankruptcy erases all or most of your debts:
    • Without a repayment plan.
    • In general allows you to keep most or all of your personal belongings.
    • Is the quickest and simplest form of bankruptcy, typically taking four to six months to complete.
  • Chapter 13 bankruptcy is a reorganization of debts:
    • Creates a three to five year repayment plan.
    • Allows you to pay back all, none, or a portion of your debts.
    • In general allows you to keep most or all of your personal belongings.
    • Is more complex than Chapter 7, but offers additional benefits.

There are benefits and drawbacks to both Chapter 7 and 13 bankruptcies. When we meet for a free consultation we will go over the pros and cons of the various chapters and help you determine which chapter is best for you. Our goal is to ensure you understand the different chapters of bankruptcy and how filing will affect you and your family.

Both Chapters Offer Many of the Same Benefits

Chapter 7 and Chapter 13 are powerful legal tools to help you regain control of your financial wellbeing. Both chapters offer the following benefits:

  • Eliminates credit card debt, medical debt, and most unsecured debts.
  • Stops harassing phone calls from creditors.
  • Stops wage garnishments.
  • Stops lawsuits filed by creditors.

Benefits of Chapter 13 Not Offered In Chapter 7

Filing for Chapter 13 commits a debtor to a monthly plan payment for three to five years. Though, for some debtors filing for Chapter 13 is the best solution to their debt problems.

Chapter 13 bankruptcy can help you:

  • Save your house by creating an opportunity for you to pay back missed mortgage payments.
  • Prevent car repossession by creating an opportunity for you to catch up on missed car payments.
  • Creates an opportunity to catch up on other missed payments, like back taxes or back spousal or child support payments.
  • In some cases, a homeowner can “lien strip” or eliminate a second mortgage.

At the conclusion of the Chapter 13 bankruptcy, any remaining credit card debt, medical bills, or other unsecured debts, and some tax debts, are discharged. To qualify for Chapter 13 you must have a steady source of income, such as from a job, self-employment, a business, retirement income, or social security.

Bankruptcy is a Powerful Tool

Both Chapter 7 and Chapter 13 are powerful tools to help you get out of debt and get the fresh financial start you deserve.

At the Law Office of Barbara B. Braziel we file hundreds of Chapter 7 and 13 bankruptcy cases every year. But our clients are never just a number. You will not be left in the hands of a paralegal. You will have access to your attorney throughout your bankruptcy case.

Call us today at (912) 351-9000 or contact us via the web to schedule a free consultation.

 

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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4 Things You Must Do During Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a powerful legal tool that offers a number of advantages to a debtor. Under this chapter you can  catch up on mortgage arrears, missed car payments, back taxes, and other debts.

To obtain the benefits of Chapter 13, there are a number of things you must do during the course of your bankruptcy. So long as you do the things required of you in a Chapter 13 bankruptcy you can get all of the benefits. The following are four things that you must do. While this list is not exhaustive, it covers the basic requirements.

Make your plan payments.

Chapter 13 bankruptcy creates a three to five year repayment plan. You must make your plan payment on-time every month.

File your personal income tax return on time.

While you are in Chapter 13 bankruptcy you have a duty to file your personal income tax returns on time. Also, if you are entitled to a tax refund most Chapter 13 plans require you to turn that refund over to the Bankruptcy Trustee to distribute to your creditors.

Avoid taking on new debt.

You are precluded from incurring new debt while you are in Chapter 13 bankruptcy. If you do need to take on new debt, like getting a loan because you truly need a new car, then you must ask permission from the Bankruptcy Court. So long as you can show a genuine need and purpose for incurring new debt, the Court may approve.

Be transparent about your finances.

In any bankruptcy filing you have a duty to be transparent about your finances. This includes your income and expenses. While it may feel vulnerable to be transparent about your finances, the trade-offs are the vast benefits of bankruptcy.

The Benefits of Chapter 13 Bankruptcy

 

  • Stops wage garnishments, stops lawsuits filed by creditors, stops harassing creditor phone calls, and stops automobile repossession.
  • Can stop foreclosure and allow a homeowner to catch up on mortgage arrears.
  • In some cases, allows a homeowner to “lien strip” or eliminate a second mortgage.
  • Creates an opportunity to catch up on missed car payments.
  • Creates an opportunity to catch up on other missed payments, such as back taxes or child support payments.
  • At the conclusion of the Bankruptcy, any remaining credit card debt, medical bills, or other unsecured debts, and certain tax debts, are discharged.

 

Filing for Chapter 13 Bankruptcy

It is our mission to ensure that you understand the power and benefits of Chapter 13 bankruptcy. We’re here to answer all of your questions. Call us right now (912) 351-9000 to schedule a free consultation.

 

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We proudly serve the people of Savanna, Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Springfield, Pembroke, Brooklet, Garden City, and Ludowici, Georgia.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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A Survival Guide To Filing Chapter 13 Bankruptcy

If you are considering Chapter 13 bankruptcy, or have already decided to file, it is important that you understand the bankruptcy process and what to expect. We’ve put together this Survival Guide to Filing Chapter 13 Bankruptcy so you can have an overview of the entire process.

Quick Overview of Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a reorganization of debts that creates a three to five year repayment plan and allows debtors to keep most or all of their belongings.

Benefits of Chapter 13 Bankruptcy

  • Stops wage garnishments, stops lawsuits filed by creditors, stops harassing creditor phone calls, and stops automobile repossession.
  • At the conclusion of the Bankruptcy, remaining credit card debt, medical bills, or other unsecured debts, and some tax debts, are discharged (erased).
  • Stops all collection action.
  • Can stop foreclosure and allow a homeowner to catch up on mortgage arrears.
  • In some cases, allows a homeowner to “lien strip” or eliminate a second mortgage.
  • Creates an opportunity to catch up on missed car payments.
  • Creates an opportunity to catch up on other missed payments, such as back taxes or child support payments.

 The Chapter 13 Bankruptcy Plan

When you file for Chapter 13 bankruptcy you will also file a proposed repayment plan. It lays out what debts will be paid back in the plan, to which creditors, and what your proposed monthly plan payment amount will be. Chapter 13 bankruptcy plans must be approved by the Bankruptcy Trustee and the Bankruptcy Court.

Once approved, you will make monthly plan payments to the Bankruptcy Trustee. He or she will then distribute those payments to your creditors being paid in the plan. The plan will pay back either all or a portion of your debts over the life of the plan. Some debts must be paid 100%, while other debts, such as credit card debts, may be partially paid back or not paid back at all.

Your monthly play payment amount is based on your monthly disposable income. Each Chapter 13 plan is case specific, so without sitting down and fully reviewing your situation, we cannot predict what your monthly plan payment amount would be.

For your Chapter 13 bankruptcy case to be successful, it is critical that you pay your plan payment on time, every month. We invite you to learn more in our article Chapter 13 Keys to Success.

The Process of Filing for Chapter 13 Bankruptcy

Meeting For A Free Consultation

First, come meet with us for a free consultation. Together we’ll review your debt relief options and explore if Chapter 13 bankruptcy is the right choice for you and your family.

Preparing the Bankruptcy Petition and Plan

Prior to filing for bankruptcy it is necessary to gather the necessary documents, prepare the bankruptcy petition, the Chapter 13 Plan, and complete a Credit Counseling course.

When you work with The Law Office of Barbara B. Braziel, we will prepare your bankruptcy petition. Then we will review it together to make sure that it is complete and accurate to the best of your knowledge. Bankruptcy is a complex area of law, and bankruptcy petitions are filed under the penalty of perjury.

File with the Bankruptcy Court

Once your bankruptcy petition and proposed plan are complete, we will file them with the Bankruptcy Court on your behalf.

As soon as your case is filed the Automatic Stay immediately takes effect. This means that all of your creditors must stop all collection action. The Automatic Stay stops foreclosure proceedings and repossessions, stops wage garnishments and bank levies, and puts an end to collection phone calls.

Attend the Meeting of Creditors

You must attend a Meeting of Creditors, also known as a 341 Hearing, approximately one month after filing for bankruptcy. The meeting is conducted by the Chapter 13 Bankruptcy Trustee assigned to your case. At this meeting the Trustee will ask you questions under penalty of perjury and may ask you questions about your proposed plan. When you hire us to file your bankruptcy case, we will prepare you for the meeting and we will be sitting by your side at the table.

Get the Fresh Financial Start You Deserve

Filing for bankruptcy can give you a fresh financial start. It can be your chance to get your financial life in order. Once you are out from under the burdensome weight of debt, you are empowered to make wise financial decisions for your future.

We Will Help You Through Your Chapter 13 From Start to Finish

It is our mission to ensure that you understand the power and benefits of Chapter 13 bankruptcy. Filing for bankruptcy is a serious financial decision. If you are feeling apprehension about the process, we understand. Know that if you hire us to file your bankruptcy case, we will be by your side from start to finish. We will prepare your bankruptcy petition and Chapter 13 plan, file it with the court, and assist you until you receive your Bankruptcy Discharge Order.

Contact us to explore how bankruptcy can help you! We offer free consultations to anyone looking to explore how to get out of debt.

 

Reach out to us by email at info@BrazielLaw.com or call (912) 351-9000. 

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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What is a Chapter 13 Repayment Plan?

There are two main chapters of bankruptcy that individuals file: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Which chapter is right for you is specific to your situation. For an overview of the primary differences between the chapters, read our article The Differences Between Chapter 7 and Chapter 13 Bankruptcy.

Chapter 13 Repayment Plan

Chapter 13 bankruptcy creates a repayment plan that lasts three to five years, depending on your specific situation. This means that a Chapter 13 debtor will be in bankruptcy for the length of the plan payments. In general, debtors who have income that falls below the median income for our state, adjusted for household size, will have a three year plan. Debtors who have income above the state median, adjusted for household size, will have a five year plan.

The Chapter 13 bankruptcy plan must be approved by the Bankruptcy Trustee and the Bankruptcy Court. It requires monthly payments to the Bankruptcy Trustee for the duration of the plan. The Trustee then makes pro-rata payments to your creditors who are supposed to be paid through the plan.

To qualify for Chapter 13, you must have a steady source of income, such as from a job, self-employment, a business, retirement income, or social security.

Amount of the Plan Payments

Chapter 13 plans vary greatly depending on the specifics of the case. Some plans pay back 100% of debts owed, while others pay nothing or only a percentage to general unsecured creditors (credit cards, medical debts).

The amount of your plan payment is determined by the proper calculation of your disposable income, the total of your priority debts (those that must be paid back through the plan), and any value you may have in non-exempt assets. Chapter 13 plans are complex and case specific. Please feel free to meet with us for a free consultation so that together we can review your situation and determine what your monthly plan payment may be.

Benefits of Chapter 13

Some of the Chapter 13 benefits include:

  • Stops foreclosure, vehicle repossession, wage garnishments, stops lawsuits filed by creditors, and stops harassing creditor phone calls.
  • At the conclusion of the Bankruptcy, remaining credit card debt, medical bills, or other unsecured debts, and some tax debts, are discharged (erased).
  • In some cases, allows a homeowner to “lien strip” or eliminate a second mortgage.
  • Creates an opportunity to catch up on missed car payments.
  • Creates an opportunity to catch up on other missed payments, such as back taxes or child support payments.

We are here to help you understand the process and decide if filing for relief under Chapter 13 is the right choice for you and your family. Contact us today (912) 351-9000 to schedule a free consultation.

 

The Law Offices of Barbara B. Braziel proudly serves Savannah, Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City, GA.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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Incurring New Debt While In Bankruptcy

While a Chapter 7 bankruptcy can provide you with a discharge of your nonpriority unsecured debts within a few months of filing your bankruptcy petition, a Chapter 13 bankruptcy is a much longer process. During the course of your three to five year plan, you may need to incur new debt to buy a vehicle or pay for medical expenses. However, you will need to be careful about incurring new debt and follow the proper procedures with the bankruptcy court.

 

Why Should You Avoid New Debt While in Bankruptcy?

 

You should not take on any new debt in bankruptcy unless it is necessary because this could interfere with your ability to make plan payments. If you miss your plan payments, you may not receive your discharge, which defeats the primary purpose of your bankruptcy.

 

Taking on some new debt may be unavoidable. If you have unexpected medical expenses, you may not have a  choice, but to take on new debt. The same situation could arise if you need a new car to commute to work or if you need to repair your car or home.

 

The bankruptcy trustee will generally not want you to take on new debt. They are responsible for looking out for the creditors listed in your bankruptcy schedules, and claims from new creditors could interfere with your ability to make your plan payments.

 

How to Get Approval to Incur New Debt

 

You should generally get approval from the trustee if you need to incur new debt during your Chapter 13 repayment period. You should be prepared to show the trustee the following:

 

  • You have kept up with all of your plan payments so far
  • The new debt is for a necessity, not a luxury
  • You have the financial means to make plan payments and incur the new debt

 

It could take 14 days to get the court’s approval, so don’t wait until the last minute if you know you will need to make a purchase on credit in the near future. If you have an emergency expense, such as medical bills, you may not be able to wait for court approval, but let your trustee know as soon as possible about your new debt.

 

Taking on new debt without telling the bankruptcy court or the trustee could interfere with your plan or get your case dismissed. Ask your bankruptcy attorney if you aren’t sure about your ability to incur new debt while in bankruptcy.

 

We’re here to help you through your bankruptcy case from start to finish. Contact us or call (912) 351-9000 to schedule a free consultation. Together we will explore how bankruptcy can help you.

 

For over 35-years we have proudly served the people in Savannah, Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Springfield, Pembroke, Brooklet, Garden City, and Ludowici, Georgia.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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Chapter 13 Repayment Plan FAQ’s

A Chapter 13 bankruptcy is a longer and more involved process than a Chapter 7 case, but comes with some advantages, such as more flexibility to keep your home and less strict income limits. Here are some frequently asked questions relating to Chapter 13 repayment plans.

 

How Much Will I Have to Pay in My Repayment Plan?

 

This answer depends on many factors, but you should know that you will have to pay 100% of your bankruptcy fees, your priority debts, and secured debts for any property you wish to keep. On the other hand, the amount your unsecured creditors will receive varies widely, and they often end up receiving pennies on the dollar.

 

Exactly how much your unsecured creditors will receive depends on your income, your disposal income income after statutorily allowed expenses, and your nonexempt assets. If you have any assets that you would have to surrender in a Chapter 7 case, you must pay at least as much to your creditors in a Chapter 13 plan as they would receive in a Chapter 7 liquidation.

 

Is a Chapter 13 plan better than a Chapter 7 Liquidation?

 

Which form of bankruptcy you choose will depend on your income, assets, and other factors. If your income is above your state’s median, and you can’t pass the means test, you may not be eligible to file a Chapter 7 case.

 

Chapter 13 also gives you a chance to keep your home and catch up on missed mortgage payments over the entire period of your plan. In a Chapter 7 case, you have less flexibility to deal with missed mortgage payments.

There are many more differences between Chapter 7 and Chapter 13 that you should discuss with your bankruptcy attorney. To learn more, read our post contrasting Chapter 7 and Chapter 13.

 

How Long Will My Repayment Plan Last?

 

Chapter 13 is a long process, lasting between three and five years depending on your income level. You will need to make your plan payments for the entirety of the plan to receive a discharge.

 

However, there are also benefits to the length plan period. You get more time to catch up on missed payments, and the automatic stay prevents any calls from creditors during the repayment plan.

 

Have more questions about Chapter 13 repayment plans? Contact a Chapter 13 bankruptcy attorney for a free consultation.

 

Every person’s financial situation is different, and bankruptcy is a complex area of law. Contact the Law Office of Barbara B. Braziel to talk about your unique financial situation and how a bankruptcy could help you.

 

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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Georgia Bankruptcy Exemptions

Your bankruptcy exemptions determine which property you protect from your creditors during a Chapter 7 bankruptcy, and are also used to calculate how much your payments will be in a Chapter 13 repayment plan. Your Georgia bankruptcy exemptions are an important consideration when preparing for a bankruptcy because they only protect a certain amount of each category of property from being seized to pay your creditors.

 

If you have property that is above the amount allowed by the Georgia bankruptcy exemptions, you may lose this property during a bankruptcy. However, if your property is below the amounts listed in the bankruptcy exemptions, you may be able to file for bankruptcy without losing any property.

 

The Most Important Georgia Bankruptcy Exemptions

 

The homestead exemption protects your interest in real property that you use as a primary residence. The current homestead exemption amount is $21,500. If you are married, you can double the exemption amount, protecting up to $43,000 worth of equity in your home. Any home equity above this amount will not be exempt.

 

The vehicle exemption allows the debtor to keep $5,000 worth of equity in their vehicle. If you are married, you and your spouse will each receive a $5,000 exemption, but you can only use your exemption on a vehicle that you own or are a joint owner of.

 

Personal property is protected by a $5,000 exemption that covers a wide variety of property, including furniture, clothes, musical instruments, household goods, appliances, animals, and crops. There is a limit per item of $300.

 

A wildcard exemption of $1,200 can be used to cover any type of property, whether you have personal items or equity in your car that is not fully covered by the vehicle exemption. Unused homestead exemption amounts up to $5,000 ($10,000 if married) can be used as well. This extra wildcard amount allows debtors that don’t own homes to keep even more of their personal property during a Chapter 7 bankruptcy.

 

Learn More About Georgia Bankruptcy Exemptions

 

Before you file for bankruptcy, you should talk to a bankruptcy attorney about all of the property you own and determine how much of it will be covered by the Georgia bankruptcy exemptions. This way, you can fully understand how a bankruptcy will affect your property ownership before you file your bankruptcy case.

 

At the Law Office of Barbara B. Braziel, we are here to give you the fresh start you deserve. Call us today at (912) 351-9000 or contact us via the web to schedule a free consultation.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

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Chapter 13 Lien Strip

A Chapter 13 bankruptcy gives you the opportunity to remove junior liens on your home. These could be liens securing a line of credit or a home equity loan. However, the liens can only be voided if certain requirements are met.

When Junior Liens Can Be Stripped

“Stripping” a lien means that the lien is removed, converting a secured debt into an unsecured debt. Unsecured debtors generally receive pennies on the dollar in bankruptcy, while secured debtors are protected by their security interests.

A lien can be stripped if there is no equity for it to attach to. This will be the case if you owe more on your mortgage than the fair market value of your home. For example, you have $250,000 first mortgage and a $40,000 home equity loan, but your home’s fair market value is only $200,000. If your home is foreclosed upon, your first mortgage lender would receive the entire proceeds of the sale, and nothing would be left over for the junior lienholder.

In this case, your junior lien could be stripped, since they are wholly unsecured.

Not All Liens Can Be Stripped

Liens can only be stripped in certain situations. First, lien must be wholly unsecured. You can’t strip a lien on your primary residence if it is partially unsecured.

For other types of property, such as car loans or investment property mortgages, you can cramdown the lien to the current value of the collateral. This works in situations where there is some value for the lien to attach to, but less value the current amount of the lien.

The cramdown isn’t permitted for a mortgage on a primary residence. It’s an all-or-nothing situation, where the lien can be stripped if there is no value to attach to, but cannot be crammed down if there is some value leftover.

If you are able to strip your lien, it will only be officially removed once you have completed your three to five year repayment plan. If you miss payments without receiving a modification of your plan, you may risk losing your opportunity to have the lien stripped, and the junior lienholder will retain the full amount of their security interest.

We’re here to help you through your bankruptcy case from start to finish. Contact us or call (912) 351-9000 to schedule a free consultation. Together we will explore how bankruptcy can help you.

 

For over 35-years we have proudly served the people in Savannah, Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Springfield, Pembroke, Brooklet, Garden City, and Ludowici, Georgia.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

READ MORE