Chapter 7 & Chapter 13
Bankruptcy relief has been essential to ensuring economic success in the United States for more than 200 years. The purpose of the bankruptcy system is to allow debtors to obtain a fresh start and to lift the weight and pressure caused by creditor calls, letters, lawsuits, garnishments and attachments.
With an experienced bankruptcy firm, you can take advantage of the protections afforded by these laws. At Redmon, Peyton & Braswell, we take pride in helping you to understand the bankruptcy process and in helping you to decide if bankruptcy is the best solution for you. If it is, our bankruptcy attorneys will offer you personal attention from the day of your initial consultation through to the conclusion of your case. We will assist you in navigating the complex bankruptcy process so you can enjoy greater peace of mind and look ahead to better days. Our bankruptcy lawyers serve clients throughout Northern Virginia and the District of Columbia.
- Preventing non-stop harassing phone calls
- Avoiding foreclosure
- Stopping evictions to buy relocation time
- Taking advantage of the Virginia Homestead Exemptions
- Stopping repossession of your vehicle
- Eliminating credit card debt
- Preventing payday loan collections or other garnishments
- Removing past judgments against you
Chapter 13 Bankruptcy Can Provide Relief to a Debtor Who Has Regular Income and Equity in a Home
For the average person with regular income who has accumulated too much debt, Chapter 13 Bankruptcy provides a plan for the Debtor to reestablish their credit while their creditors get paid.
Ever since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult to qualify for liquidation, consumers who have income exceeding a floating means test (11 USC 707) have been relegated to expensive and complicated filings under Chapter 11 of the Bankruptcy code or spending money for debt consolidation and work out advisors, which often only exacerbate their financial problems.
The provisions of Chapter 13 provide a road map for debt relief for Debtors who qualify (subject to limits for secured and unsecured debt). A plan is prepared, approved by the Court, and administered by the Chapter 13 trustee. The plan can take up to five years to complete and the debtor’s creditors get paid as much as they would have been paid in Chapter 7 liquidation, provided they file a proof of claim, subject to challenge by the Debtor and approved by the Court. Creditors who fail to file a proof of claim are not paid and the debt is discharged.
The process is more expensive than liquidation under Chapter 7 but far less costly and time consuming than a Chapter 11 proceeding. The Debtor can put his legal fees (except the filing fees and associated costs) in the plan to be paid over the life of the plan, thereby freeing up needed cash flow. The Debtor can budget his or her monthly payments to the plan much like having an automatic payment deducted from a paycheck.
People contemplating bankruptcy relief are often faced with the probability of losing their equity in their principal residence. In a Chapter 7 liquidation, the equity can be used to pay creditors. In a Chapter 13 proceeding, however, the debt on a principal residence can be part of the plan or can be paid outside of the plan. But suppose the debt on the residence includes a second lien wholly unsecured by the equity in the property. In both Chapter 11 and 13, there is a prohibition against modification of a claim secured only by a Debtor’s principal residence. In a Chapter 13 case where the value of the property doesn’t fully secure the first lien and the second lien is not secured by any equity in the property, the limitation has been held not to apply. A claim that is not secured by any equity in the property can be “striped off” in a separate contested matter. See Wright v. Commercial Credit Corp. (In re Wright) 178 B.R. 703 (E.D. Va 1995); In re Dean, 314 B.R. 474 (Bankr. E.D.Va 2004).
After the plan is completed and the Court issues a discharge to the Debtor, all of the debt listed in the plan is erased. Thus, Chapter 13 Bankruptcy can provide significant relief to a Debtor who is disciplined and sticks to a repayment plan.