The good news, that house you bought in 2008 has almost doubled in price. The bad news, you’re still struggling each month and no progress is being made on the credit card balances.
Today’s chapter 13 filer in Chapter 13 is increasingly a “middle class” person or family. Why? As of July 1 the homestead exemption in Colorado went from $60,000 to $75,000. (for persons under 60, at 60 years or older you get $105k, in fact if you’re married and co-own a home only one of you must be 60 to qualify for the $105,000 exemption). But, the price of housing has outstripped even the greater exemption. And, to make matters more interesting, persons who bought a while ago cannot afford to rent something similar, so selling is often not an option.
So more good news. The house you own is making you wealthy long term. But more bad news, you still cannot make progress on your credit cards and unsecured loans. Chapter 13 is the answer, and while more complex than Chapter 7 and more expensive and time consuming, a well planned Chapter 13 can put you in a much better place.
In a Chapter 13 you generally must pay over your disposable income to the Chapter 13 trustee for 36 to 60 months. You may generally pay directly or use a wage attachment. This means you pay what you can on credit cards and loans and at the end of your Plan , the rest of your debt goes away. This can be exactly what the lawyer ordered for a family with a lot of equity in a home. You can also cure mortgage arrears in a 13, over time with reasonable payments that are decided by your buget and not by a computer at your mortgage company.
Basically, because home prices have gone crazy in Colorado (again) it is important that your bankruptcy lawyer know how to deal with the option of filing for Chapter 13 bankruptcy protection, and not be one of these $499 lawyers who only file chapter 7 cases. Some of the advantages include the following:
1. Keep your home, even where you have too much equity to file a chapter 7;
2. Cure mortgage arrears over time with reasonable payments;
3. Discharge joint debt with an ex-spouse that was assigned to you in a divorce;
4. Continue to make retirement plan contributions;
5. Possibly cram -down a vehicle loan, or pay the amount the car is worth rather than what you owe;
6. Discharge a second mortgage in certain circumstances;
7. Pay taxes over time inside the plan;
8. Put all of your debt into one monthly payment which is driven by your budget and not by your most aggressive creditor;
9. Maintain the ability to modify your plan (aka lower your payment) when circumstances change.
In summary and to distill the thing, I would advise a Chapter 13 for a working person or family in Colorado with a stable job or income, that nonetheless has significant consumer debt and or has more than $75,000 of equity in their residence. It can, while shedding the debt, protect your home equity and allow you to continue building retirement savings. It forces all of your creditors into one place and deals with them over time. While complex legally, it’s a valuable tool for many of my Colorado clients , and increasingly so in this housing market.
It’s important that your bankruptcy lawyer know when a Chapter 13 filing may make sense. And it’s important that your lawyer be experienced in guiding you through the system to arrive a fair plan and payment. If you have questions about whether chapter 13 bankruptcy may be a solution for you , please call (303)670-4242 for a confidential consultation at our I-70 and Denver West location.