Millions of homeowners took advantage of coronavirus mortgage deferrals during 2020. These programs were set to end at the beginning of 2021. Although the Federal Housing Administration recently gave homeowners a brief stay of execution, the day of reckoning cometh. Once that day comes, banks will demand payment on past-due mortgage loans. And, they will probably be quite impatient. If you’re now asking how does chapter 13 bankruptcy work, you are not alone.

In Georgia, mortgage lenders do not need court orders to seize property. Therefore, Chapter 13 might be the only way to protect your home and other secured assets from creditor seizure. Furthermore, Chapter 13 eliminates most unsecured debts and makes your assets easier to afford. More on that below.

Like all legal proceedings, Chapter 13 bankruptcy is much more complex than filling out forms. Only an experienced Athens bankruptcy lawyer helps your family get the most out of the fresh start the Bankruptcy Code guarantees. Without such a partnership, debtors must feel their way in the dark. Therefore, they are at the mercy of the big banks and their posse of lawyers.

Qualifying for Chapter 13 in Georgia

People who file Chapter 13 must meet some formal and informal qualifications. For example, they must complete a credit counselling course, which is usually available online.

More to the point, their debt cannot be above certain ceilings. As of January 1, 2021, Chapter 13 debtors cannot have more than $1.4 million in secured debt, such as home mortgages. They cannot have more than $400,000 in unsecured debts, such as credit cards. These figures include both current and past-due obligations.

There are some informal obligations as well. Since these rules are unwritten and vary in different jurisdictions, only an experienced Athens bankrutcy lawyer is familiar with them. So, an attorney keeps the court from blindsiding you with rules you had no idea existed.

One of these informal rules usually involves the income/expense balance in Schedules I and J. Chapter 13 debtors must have sufficient disposable income to fund a monthly debt consolidation payment. If they cannot make this payment, the court could dismiss their petitions almost immediately. More on this below.

How Does Chapter 13 Bankruptcy Work with the Automatic Stay?

Section 362 is perhaps the most important feature of a Chapter 13 bankruptcy. Many distressed debtors file bankruptcy just to take advantage of the Automatic Stay. This provision immediately stops creditor adverse actions like:

• Foreclosure,
• Wage garnishment,
• Repossession,
• Creditor lawsuits,
• Eviction, and
• Lien placement.

In a Chapter 13, the Automatic Stay usually remains in force for up to five years. Therefore, distressed debtors have ample time to erase past-due mortgage payments and other secured debt delinquency. Creditors can only bypass the Automatic Stay in limited situations. And, they must get past your Athens bankruptcy lawyer to bypass it.

On a related note, bankruptcy also exempts (protects) assets from creditor seizure and liquidation. Many banks can seize your house, car, personal property, or retirement account to pay debts. Bankruptcy blocks these efforts.

The Confirmation Hearing and Athens Bankruptcy Lawyers

Generally, the confirmation hearing is a meeting and then a hearing. If things go well at the 341 meeting, the hearing is usually easier. So, an Athens bankruptcy lawyer needs to be present at both events.

At the 341 meeting, the trustee (person who oversees the bankruptcy for the judge) approves or disapproves the debtor’s proposed repayment plan. As mentioned, this plan centers on a monthly debt consolidation payment. The size of this payment obviously varies based on the amount of debt. Generally, however, it’s about the size of a rent or mortgage payment.

An Athens bankruptcy lawyer helps ensure that the payment is not so large that it is unmanageable, yet large enough to meet legal requirements. Furthermore, if circumstances change later, an Athens bankruptcy lawyer might be able to modify the payment terms.

If the trustee approves the plan, creditor objections at the confirmation hearing almost always fail. In other words, lawyers who do their homework usually do well on the tests that follow.

Part of filing bankruptcy is recovering from bankruptcy. This recovery usually comes easier in a Chapter 13 than in other forms of consumer bankruptcy. Chapter 13 filings drop off credit reports rather quickly. Furthermore, after sixty months of making a monthly debt consolidation payment, debtors usually have the financial discipline they need to weather the financial storms of life and maximize their fresh starts.

Chapter 13 helps distressed debtors pay bills on their own terms. If you’re wondering how does chapter 13 bankruptcy work, you might be ready for a free consultation with an experienced Athens bankruptcy lawyer at Morgan & Morgan, Attorneys at Law, P.C. We routinely handle matters in Clarke County and nearby jurisdictions.

Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.