Chapter 13: An overview
Chapter 13 Bankruptcy may help you consolidate credit card debt for pennies on the dollar, stop foreclosures, catch up mortgage payments, and strip your second mortgage. The qualifications for filing are determined by the amount of your total debt and the amount of your income.
Qualifications for Chapter 13
Whether you live in Fort Myers, North Ft. Myers, Cape Coral, Lehigh Acres, Bonita Springs, Estero, Naples, Labelle, or Punta Gorda, Fl, you must file your bankruptcy petition through the bankruptcy court in Fort Myers. All court hearings and creditor’s meetings will take place in Fort Myers. In a chapter 13 bankruptcy, you must pay the amount of your disposable income over three to five years to the chapter 13 trustee. The amount of disposable income paid to the trustee must be equal to or exceed the amount of the value of your nonexempt property. Disposable income is calculated by looking at the amount of your income for the six months before filing bankruptcy and subtracting the amount of your monthly expenses as adjusted by guidelines published by the United States Trustee’s Office. The expense guidelines change approximately twice per year and the updated amounts can be found by clicking the Department of Justice’s website for median income and expenses. Expenses vary by region. If you live in Fort Myers, Cape Coral, Lehigh, Estero, or parts of Bonita, you must use the local expenses for Lee County. If you file in Naples, you must use the local expenses for Collier County. If you live in Punta Gorda, you must use the amounts for Charlotte County and so forth.
The chapter 13 trustee distributes the amount of your disposable income to your unsecured creditors anywhere from 3 to 5 years. (If you qualify chapter 7 bankruptcy but choose to file chapter 13 bankruptcy, you can make the payments anywhere from 3 to 5 years. If you do not qualify for chapter 7 bankruptcy because of your income, you must make the payments in the chapter 13 bankruptcy for 5 years).
In addition, the trustee will usually require you to surrender any tax refunds that you receive while you are in bankruptcy. The rules concerning exempt property are the same as with chapter 7 cases. The amount of disposable income you pay your unsecured creditors in the chapter 13 case must be equal to or greater than the amount of your nonexempt property. The document that you file with the Court that explains how you plan to pay your creditors is called the Chapter 13 plan.
In order to be eligible for chapter 13 bankruptcy, your amount of unsecured debt cannot exceed $360,475 and the amount of your unsecured debt cannot exceed $1,081,400.00. If your debt exceeds that amount, you must file chapter 7 or chapter 11 bankruptcy.
Saving your home in chapter 13 bankruptcy
One advantage of filing chapter 13 bankruptcy is that it might allow you to keep your home if you are behind on your mortgage payments and/or if you have a large second mortgage. Let’s say you are six months behind on your mortgage and the bank has initiated foreclosure proceedings. You are financially able to pay the regular mortgage but you don’t have the funds to catch up on the amount that you are behind. Bankruptcy may allow you to stop the foreclosure, resume paying your regular monthly mortgage payments, and pay the amount that you are behind over a three to five year period. In addition, if the value of your property is less than the amount owed on your first mortgage, you can keep the property without paying the second mortgage.
Chapter 13 rules concerning your home for cases filed in Fort Myers, Cape Coral, and Naples
If your home is located in Southwest Florida, including Fort Myers, Naples, Cape Coral, Lehigh Acres, Bonita Springs, Estero, Punta Gorda, or Labelle, Fl, you must be aware of the local rules of the trustee’s office regarding mortgage payments. If you are current on your mortgage payments, the local chapter 13 trustee will allow you to keep making your mortgage payments directly to the bank. The payment must be made by automatic debit unless this payment option is not available. If you are behind on your mortgage payment, both the regular mortgage payment and the amount that you are behind must be paid through the chapter 13 plan while you are in bankruptcy.
Let’s say your home is worth $100,000. The first mortgage is $125,000. The second mortgage is worth $100,000. Your first mortgage payment is $700 per mothh. Your second mortgage payment is $600 per month. You are behind 5 months on the mortgage ($700 x 5 plus late fees = $4,000). You and your spouse earn $4000 per month. Your expenses not including the mortgage are $3,000 per month. You have credit card debt of $50,000. You have no non-exempt assets. The bank started foreclosure proceedings on the home. What to do?
First, calculate your disposable income. $4,000 (income) – $3,000 (living expenses) = $1,000. disposable income = $1,000.
Second, determine whether your second mortgage is totally unsecured. In this case, the home is worth $100,000, which is less than the $125,000 first mortgage. Your second mortgage of $100,000, therefore, is totally unsecured. It will be treated like your credit card debt. You do not have to pay it back in order to keep the house.
Third, determine, how much you will pay your creditors in the chapter 13 case. Let’s say your pay your $1,000 disposable income for 5 years. Out of this amount, the trustee will be paid an administrative fee of 10% of your debt, which is $100 per month in this case. Your regular mortgage payment amount of $700 will be paid out of the $1,000. The $4,000 that you are behind will be paid over the 5 years at $66.67 per month ($4,000 divided by 60). The remaining $133.37 per month over 5 years will be paid to your unsecured creditors, which are the credit card companies and second mortgage. By the end of the five years, you would have paid your second mortgage company and credit companies $8,002.20 ($133.37 x 60 months). You will have paid off the $4,000 that you were behind on the first mortgage. You will continue to pay the first mortgage of $700 per month until it is paid off. You settled your $100,000 of the second mortgage and $50,000 of credit card debt for $8,002.20, which is approximately 5% of the total debt. The foreclosure case will be dismissed. You will get your bankruptcy discharge. The credit card company and second mortgage company can’t come after you for any additional payments.
Keep in mind this example is very simplified. We will review the facts and circumstances of your case at your initial consultation to determine your specific needs.
The Chapter 13 Trustee serving cases filed in Ft. Myers is Jon Waage. You can access your case history, which shows the payments that you made and how your money has been distributed by clicking the Chapter 13 Trustee’s website.
If you want your payments to be made by auto debit, click the auto debit form here.
If you want to pay electronically by e-pay, click here for the EPay Online Payment System guide.
To contact Jon Waage’s office, please call (941) 747-4644. Fax is (941)-750-9266. His mailing address for everything except plan payments is P.O. Box 25001, Bradenton, FL 34206.
To make payment on your chapter 13 plan directly rather than using auto debit, send a cashier’s check or money order to Chapter 13 Trustee Payments, P.O. Box 260, Memphis, TN 38101. Make sure to write your name and case number on the cashier’s check or money order. Cash, personal check, business check, or credit cards are not accepted.
At this time, the Fort Myers division is not implementing Wage Withholding Orders.