By Keith F. Carr, Esq.
1/10/08

Because serious changes to the Bankruptcy Code are being contemplated in the fallout from the subprime lending problem, this blog is reposted giving an overview of Chapter 13 bankruptcy.

The Law Offices of Keith F. Carr represents individuals and businesses in Chapter 13 Bankruptcy. Many people do not understand how Chapter 13 can help them other than it is a bankruptcy involving a debt consolidation plan. But Chapter 13 can help a debtor in various ways, more than is realized. Here then is the list of the top 7 benefits of Chapter 13:

1. If you are behind in your mortgage payments prior to filing for Chapter 13, you may cure the mortgage arrearage through the Chapter 13 plan over a period of three to five years without your mortgage being affected.

2. You may sell or refinance your home or business while participating in a Chapter 13 case.

3. A Chapter 13 plan of repayment may provide for financing of a car for the total amount of the vehicle's value. In other words, a debtor wishing to finance his car in a Chapter 13 plan may pay the value of the vehicle (as opposed to the loan amount which is probably much more than the value of the car), unless the car loan is relatively new - within 910 days of filing of the Chapter 13.

4. Unlike credit counseling services, a Chapter 13 plan may provide for the payment of creditors with or without interest. In addition, the payment of creditors need not be for 100% of the debt but may be for a percentage of the debt based on debtor's assets and expenses at the time of filing.

5. In addition to automatically stopping any collection activity of creditors such as lawsuits, wage garnishments, home foreclosure, and telephone calls, the Chapter 13 bankruptcy automatically stops any collection activity against co-debtors, who have contracted the debt along with the debtor. This is called the co-debtor stay.

6. A Chapter 13 payment plan may provide for the payment of state and federal tax liabilities over a period of three to five years, whether or not the taxes are dischargeable.

7. A Chapter 13 case may be dismissed at any time by the debtor, who might quickly recover from any financial problems he or she is having.

By Keith F. Carr, Esq.

11/6/07

I am often asked: What will be the effect of a bankruptcy upon my credit score? What these people should be asking is: What is my credit score now? Is it good right now?

In most cases, clients have very poor credit already. They are under constant pressure from creditors. Many clients are defendants in lawsuits or have a judgment against them. They have suffered from repossession of their vehicle. They may have even suffered or are now suffering from the foreclosure of their home. At the least, they are suffering from delinquencies in the payment of their credit cards, in most cases multiple delinquencies. All of that is reflected on their current credit reports.

Under the Fair Credit Reporting Act, all of this credit collection activity is reported and it may continue to be reported for the following seven years. A Chapter 7 Bankruptcy stays on your credit report for ten years. A Chapter 13 Bankruptcy will continue to be reported by credit reporting agencies for a period of seven years.

So the answer is that while the Chapter 13 or Chapter 7 bankruptcy may affect your credit, it may be already bad to begin with. The bankruptcy bars and alleviates the collection activity above-stated and may even have a good effect on your credit because of this.