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Chapter 13 Plan Payments

Although in most cases the plan payments remain the same, it is possible that adjustments may become necessary should the debtor's income change significantly while in chapter 13. If the debtor is unemployed or expects a salary increase after the plan confirmation, the chapter 13 trustee will request that the debtor submit an amended plan whenever the income changes occur. The trustee will consider not only the salary increase, but also whether the debtor's expenses have increased as well. In such situations, the disposable income may be unaffected and the plan payment could stay the same.

Chapter 13 and Home Foreclosure

In cases of impending foreclosures, homeowners are allowed to include their mortgage arrears in the chapter 13 plan. However, timely mortgage payments must resume on the 1st of the month following the bankruptcy filing. If the value of the home is below that of the first mortgage on the property, the debtor may be able to discharge a second mortgage and any other junior lien(s) against the home. To receive discharge of a second mortgage, the debtor must complete the chapter 13 plan. Should the bankruptcy be dismissed prior to completion of the chapter 13 plan, the second mortgage lien would remain on the property.

        Chapter 13 Benefits:
  • Avoiding home foreclosure by placing all mortgage arrears in the repayment plan to be paid over a three to five year period.
  • Repaying outstanding tax liabilities through the bankruptcy plan rather than negotiating those with the taxing authorities directly.
  • Reducing the monthly car payments for vehicles purchased at least 2 1/2 yrs. prior to the bankruptcy filing.
  • Discharging the second mortgage on a personal residence whenever the property is worth less than the first mortgage.
Chapter 13: Debt Repayment

Debt repayment in chapter 13 may be an alternative to chapter 7 bankruptcy whenever the debtor's current monthly income exceeds the state median income for the respective size of household or the debtor wishes to repay certain debts over a longer period of time (mortgage arrears and tax liabilities). The chapter 13 plan is three to five years and the chapter 13 payment must equal the debtor's monthly disposable income - portion of the monthly income not required to meet the necessary needs of the debtor and his/her dependents.

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Chapter 13 Process