Chapter 13 gives distressed debtors up to five years to catch up on past-due home mortgage payments. The same thing applies to other secured debt delinquency, such as vehicle loans. Other options are available as well.

In the first quarter of 2020, the mortgage delinquency rate increased significantly. If borrowers fall more than one or two payments behind, it is almost impossible to catch up. At this point, most lenders accelerate the loan, so the bank no longer accepts partial payments. Therefore, the financial hole deepens every month.

A good Athens bankruptcy lawyer does more than give debtors the fresh start they need and deserve. Attorneys also stand up for you in court if necessary. Even better, attorneys provide solid legal advice through the whole process, so you can make the best possible choices.

Getting Ready to File

Frequently, providing notice of filing is the most important pre-filing step in a Chapter 13. Most mortgage companies act quickly in foreclosure matters. Georgia is a non-judicial foreclosure state. Therefore, lenders do not need to go to court to throw people out of their homes. Unless they know about the bankruptcy filing, they are not obligated under the Automatic Stay. More on that below.

Banks frequently buy and sell mortgage securities. The largely unrestrained sale of these securities was one of the Great Recession’s triggers. Commonly, borrowers send their payments to one company, but another company services the note. That’s especially common if the note is delinquent.

Technically, banks are supposed to notify their customers of these transfers. But banks are notoriously lax in this area. For example, in February 2020, Wells Fargo paid a $3 billion fine because it ignored so many customer needs for so many years.

So, an Athens bankruptcy lawyer must ensure that the servicing company receives notice of the bankruptcy. Otherwise, a foreclosure sale could proceed. These sales, although illegal, are not easy to undo.

There are a few other matters as well. For example, Chapter 13 debtors must take pre-filing credit counselling courses. It’s also a good idea to gather financial documents, such as tax returns and mortgage loan documents, so the trustee can review them if necessary.

Athens Bankruptcy Lawyers and the Automatic Stay

In most cases, Section 362 of the U.S. Bankruptcy Code prohibits all forms of creditor adverse action, such as:

• Repossession,
• Eviction,
• Wage garnishment,
• Foreclosure,
• Collections lawsuits, and
• Creditor harassment

As a matter of fact, this provision technically prohibits all communication between debtors and creditors. Some lenders interpret this provision broadly. Out of an abundance of caution, they stop sending monthly statements and suspend ACH debits. These bills are still due, so debtors or their Athens bankruptcy lawyers must make alternative arrangements.

The Automatic Stay does not just stop immediate adverse actions. It usually remains in effect as long as the Chapter 13 is pending. This extension is very important in terms of the protected repayment period.

The Protected Repayment Period

Most debtors meet with the bankruptcy trustee (the person who oversees the bankruptcy for the judge) about six weeks after they file their voluntary petitions. 

At this meeting, the trustee essentially places the debtor on an allowance for either three or five years, depending on the debtor’s income. All disposable income goes to a monthly debt consolidation payment. The trustee then distributes the payment according to legal priorities. Delinquent secured debts are usually first, followed by delinquent unsecured debts, like medical bills and credit cards.

Assuming the debt repayment plan erases all secured debt delinquency before the protected repayment period ends, moneylenders cannot dispute it. They must wait for their money like everyone else. So, the debtor is in the driver’s seat.

When the protected repayment period ends, the judge discharges (eliminates) any remaining unsecured debt. So, debtors have a zero past-due balance on secured debts and little or no unsecured debt. That’s the essence of a fresh start.

“Chapter 20” Bankruptcies

Frequently, the debt consolidation payment is several hundred dollars a month or more. That payment level might not be sustainable for many families.

Not to worry. Federal law gives debtors the right to switch from a Chapter 13 to a Chapter 7 at almost any time. The debt consolidation obligation goes away and the judge discharges unsecured debts. So, families get their fresh starts even faster.

Call a Georgia Bankruptcy Attorney to Know More about Chapter 13

Chapter 13 allows families to catch up on past-due accounts on their own terms. Instead of providing for an outright discharge of your liabilities, you get up to five years to repay your debt. However, several complexities may be involved in filing for bankruptcy, which can have certain life-changing consequences. It is, therefore, crucial to have proper legal representation. For a free consultation with an experienced bankruptcy lawyer in Athens, contact Morgan & Morgan, Attorneys at Law P.C. on (706) 843-2905.  We routinely handle matters in Clarke County and nearby jurisdictions.