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Chapter 13 Bankruptcy

 


Experienced Rochester, New York Bankruptcy Attorney 

Chapter 13 of the federal Bankruptcy Code allows an individual who finds he or she cannot pay their debts as they become due to submit a repayment plan to the Bankruptcy Court. As soon as you file for Chapter 13, your creditors are prohibited from contacting you or suing you. The debts usually covered by a Chapter 13 plan are credit card debts, consolidated loan debts, income tax debts and medical debts. The plan usually provides that those debts are not paid in full, but if after completion of the plan, the portion of the debt provided by the plan to be paid, is paid, the debtor gets a discharge of the entire debt. Once the plan is confirmed by the Court, creditors are prohibited from collecting debts directly from the debtor. Instead, the debtor pays the preapproved amount of money each month to a Chapter 13 Trustee, who distributes the money to the creditors, as provided in the Chapter 13 plan. The Chapter 13 plan is prepared by the attorney for the debtor. When the last payment is made, the debtor is no longer legally responsible for the remainder of his or her dischargeable debts, and the person gets their fresh financial start. The Chapter 13 plan lasts for up to five years. Under certain circumstances, the court may approve a plan that lasts as little as three years, as long as the debtor is making a meaningful effort to repay his/her debts.

Save your Home Through Chapter 13

Through Chapter 13, you may also repay the amount you are past due on your mortgage (i.e. "mortgage arrears") by paying to the trustee the total amount you are behind, divided by 60, each month for five years (60 months). You must be in a position to make future payments in the full regular, monthly amount, directly to the bank. This option is best for people who were out of work for a period of time due to illness, layoff or unemployment, but who are now back to work and able to pay their mortgages going forward, but unable to catch up on the back payments owed. I have represented many, many debtors who have successfully saved their home in this manner through Chapter 13. 

If you are struggling with debt and would like more information on Chapter 13 bankruptcy and how bankruptcy can get rid of debt, I am here to help. The initial consultation is free and together we will formulate a plan to determine if Chapter 13 bankruptcy is right for you. I offer personal attention and my rates are reasonable. Contact my office today online or by telephone at 585-546-7410 to speak with an experienced New York Chapter 13 bankruptcy attorney.   

 

Eliminating Second Mortgages (also called Home Equity Lines of Credit) Through Bankruptcy

In 2001, the appeals Court for the Second Circuit issued a decision entitled In Re: Richard and Lorrie Pond, 252 F.3d 122 (2001), in which the Court afforded a very powerful bankruptcy tool that has resulted in more homeowners being able to keep their homes and avoid foreclosure  . The law helps homeowners who find themselves "underwater" on their mortgages, owing more to their lender than their homes are worth. In the past few years many people in Rochester, Buffalo and throughout Western New York financed the purchase of their homes by obtaining a first mortgage for practically the full purchase price. Then, after several years of payments, people obtained home equity lines of credit (not realizing that they are in fact second mortgages), based upon the assumption that the value of the house increased creating equity in their home (i.e. "paper equity"). When the economy slowed down starting in 2007, people maximized their lines of credit and started having trouble making two mortgage payments. Sometimes, people would pay the second mortgage instead of the first mortgage because the monthly payment amount was less. Now, the first mortgage holder wants to "call" the mortgage because you have become behind in payments. If you obtained these types of loans or refinanced your home and took a second mortgage, you may now find yourself in a situation where you are having trouble making payments on two mortgages. I can assist you in determining whether the option of eliminating your second mortgage is available in your case.

If You Owe More Than What Your Home is Worth

If the value of your home has fallen below the total outstanding balance of your first mortgage, it may be possible to eliminate or "strip off" the Home Equity Line of Credit (i.e. the second mortgage) as a result of the Court's decision in In Re: Pond. For example, if you purchased a home for $85,000.00 and now have a balance of $78,000.00 on the first mortgage, and a balance of $20,000.00 on the second mortgage, and if the value of your home now stands at $75,000.00 due to the slowing economy and falling home values, you may be able to rid yourself of the $20,000.00 second mortgage through a Chapter 13 bankruptcy filing.

The amount that you owe the second mortgage company will be paid at the same rate as the rest of your unsecured debt, which is often significantly less than what you owed. Eliminating second mortgages is just one of the powerful tools available under the Bankruptcy Code that will help you get back on your financial feet, get a fresh start, and save your home. I am here to assist you with determining whether the option of eliminating your second mortgage is available in your case. 

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  • 45 Exchange Street,
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  • Rochester,
  • NY 14614

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