Patrick Moscatello

Attorney at Law

"The Bankruptcy Lawyer"

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Chapter 13

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Questions and Answers

What Kinds of Bankruptcy are there?

There are a number of different kinds of bankruptcies. Most individuals file either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy. This page deals with Chapter 13 Bankruptcy.

What is Chapter 13 Bankruptcy?

A Chapter 13 is filed if you are behind on payments on a secured debt. The most common situation is where homeowners are behind on their mortgage payments or property taxes. Chapter 13 can be used to give homeowners a chance to catch up on their overdue payments without the threat of losing their home through foreclosure. We will go over your personal situation with you when you meet with an attorney in our office.

Will I lose my house if I file a Chapter 13?

In a Chapter 13, the debtor enters into a "plan" to pay back overdue payments to certain creditors. A Chapter 13 permits you to keep your house and pay back your overdue mortgage payments. Overdue payments on your mortgage (known as "arrearages") are paid over a period of time though the Chapter 13 Trustee. You also continue to make your regular mortgage payments to your mortgage company. In many cases, other debts, such as credit cards and medical bills, can be wiped out while you pay back your mortgage arrearages. For example, if your mortgage payment is $1000 per month and you are 5 months behind, you will owe your mortgage company approximately $5000 plus late fees and interest. In a Chapter 13 plan, depending on your income, you can take between 36 and 60 months to pay that amount back. Your monthly payments would be approximately $100 to $160 per month. This payment includes a small commission paid to the trustee. There may be additional charges for late fees and interest, which may raise this monthly amount. After your plan is completed, you simply keep paying your regular monthly payment to your mortgage company. We will custom tailor your Chapter 13 plan to address your personal financial situation and ability to repay your arrearages.

What if my house is in foreclosure?

Once you file a Chapter 13 Bankruptcy, any Foreclosure proceeding against your home is automatically stopped and remains stopped as long as you remain current on your payments to the trustee and your regular monthly mortgage payments. Once you make all the payments required under your plan, your house will no longer be in foreclosure.

What about overdue property taxes?

Overdue property taxes can be included in your Chapter 13 plan and paid back over a period of time. All action by your municipality to collect the tax is automatically stopped when your Chapter 13 is filed.

What if a Sheriff's sale has been scheduled?

If a Sheriff's sale has been scheduled for your home you should seek legal advice IMMEDIATELY. Your Chapter 13 must be filed BEFORE the Sheriff's sale. Our office can take all steps necessary to see that your Sheriff's sale is stopped.

Will I Lose My Possessions if I file Bankruptcy?

The bankruptcy laws include "exemption" rules, which permit you to keep a certain amount of property - including your personal property - even if you are wiping out your debt. While there are limits to the amount of property you can keep, most individuals keep all of their property.

Will I lose my Car if I file Bankruptcy?

If you are behind on you car payments you can pay those "arrearages" backs over the course of your Chapter 13 Plan. If you are current on your automobile payments, you simply continue to make your monthly payments on time. Either way, your automobile finance company cannot repossess your car as long as you stay current on your regular monthly payments after your Chapter 13 is filed.

Can Bankruptcy stop a wage garnishment?

Once you have filed a bankruptcy, all lawsuits are automatically stopped and all garnishments must immediately cease. Our office will assist you to see that your garnishment is stopped promptly.

Will my employer be notified that I have filed a Chapter 13?

Unless you owe your employer money or there is a garnishment in effect, there is no need to notify your employer that you have filed bankruptcy.

Do I have to go to court?

In Chapter 13 Bankruptcy you have to attend a "meeting of creditors" conducted by the Bankruptcy trustee. The meeting of creditors is like a court hearing except that there is no judge present. Instead, the Chapter 13 Trustee conducts a short meeting held in Trenton, Camden or Newark depending on where you live. Your attorney will accompany you and the Trustee will ask you a few questions about the contents of your petition. Typically, the meeting of creditors is about one month after your Chapter 13 is filed.

Are there some debts that I cannot get out of by filing a Chapter 13?

There are some kinds of debts that cannot be discharged in Bankruptcy. These include child support, alimony obligations and most student loans. In addition, there are special rules for discharging other kinds of debts such as income taxes. While it is possible to discharge some of these debts, each case is different. If a debt cannot be discharged, one option is for you to pay back the overdue debt through your Chapter 13 plan. If you have these kinds of debts we will go over them when you come in and let you know which ones can be discharged.

How do I know if Chapter 13 is for me?

We will be happy to meet with you at no charge to go over your situation and to advise you whether Chapter 13 can be used to deal with your financial problems.

How long will my Chapter 13 be on my Credit record?

Your Chapter 13 will appear on your credit record for a period of 10 years. That doesn't mean you can't get credit for 10 years. Usually, you can rebuild your credit starting approximately one year after your Chapter 13. Some mortgage companies and automobile financing will actually lend you the money to buy a house or a car immediately after your Bankruptcy. How successful you are at rebuilding your credit depends on a number of things including your income at the time you apply for new credit and the type of credit you apply for.

Federal Exemptions