Chapter 13 Frequently-Asked Questions (FAQs)

Q: How can I save my house from being foreclosed?

Answer: When you get behind on your mortgage payment by several months, the bank usually wants to receive its money in one payment. A Chapter 13 bankruptcy, however, can force the bank or mortgage company to accept partial payments on the arrears, as long as your mortgage delinquency is repaid within 3 to 5 years. After the 3 to 5 year bankruptcy period, then you resume paying the mortgage directly to the bank.

Q: Does a Chapter 13 work if I am facing back taxes or I’m several months late on my car payment?

Answer: Yes, as long as you provide for repayment within the 3 to 5 year period from your bankruptcy filing, then you can also save your home from a tax sale or your vehicle from repossession.

Q: How do I make the payments?

Answer: In order to qualify for a Chapter 13 bankruptcy, you have to have regular income, either from your job or another source, such as a pension or Social Security. Each month, you pay the Chapter 13 Trustee through an automatic pay withdrawal or an electronic bank transfer. The Trustee then takes those funds and makes payments to your mortgage company or other designated payees.

Q: Does the bankruptcy ruin my credit?

Answer: Any bankruptcy filing does show up on your credit report for 10 years from the filing date. However, most people considering bankruptcy already have impaired credit ratings. If you successfully complete a Chapter 13 plan, then the credit reporting bureaus are sent a letter indicating your success.

Q: What happens with my credit card payments and other debts?

Answer: In a Chapter 13 plan, you must pay back credit card and other unsecured debt using your ‘best efforts’. In other words, if you have no available funds after considering your regular expenses (such as utilities, food, clothing, car insurance, etc.), then you would not pay back credit card debt, and it would simply be eliminated when your case was over. If you do have available funds, then the credit card debt is repaid through Chapter 13 at 0% interest, which is one of the biggest advantages of Chapter 13.

Q: How do I put up with harassing creditors who have been threatening me?

Answer: Debt collectors and creditors are forbidden from contacting individuals who are in bankruptcy. In fact, if they do harass people in bankruptcy, then they can be sued and you could be entitled to money damages.

Q: How much does filing Chapter 13 cost?

Answer: The court filing fees are $185 for a Chapter 13 case. There is a legal fee required up front, but the majority of the legal fees will be paid through the Chapter 13 plan.

Q: What do I do if family members find out about my bankruptcy?

Answer: They should realize that bankruptcy concepts go back to the Old Testament and are a part of the Judeo-Christian tradition. It is also a part of the U.S. Constitution. Moreover, with our modern lifestyles, severe medical problems or loss of income can afflict anyone. These types of events can lead to bankruptcy, and it should not be a matter of shame or dishonor.

Q: How do I handle the paperwork involved?

Answer: There is a considerable amount of paperwork involved with a Chapter 13 bankruptcy that an attorney usually handles. First you should work with your attorney to ensure that the paperwork is accurate and that you have included all your creditors. Second, once the Chapter 13 has been filed, your main job is to make sure that your monthly payments are made.

Q: Will I have many court hearings?

Answer: There is a 20-minute meeting that you are required to attend before the Chapter 13 Trustee at the USX Tower, Pittsburgh. Otherwise, if you make your plan payments, you will never have to go to court.

Q: What happens with my sheriff’s sale?

Answer: The bankruptcy filing essentially overrules the sheriff’s sale. Your sheriff’s sale will be suspended throughout the Chapter 13 bankruptcy. And once your Chapter 13 is over, in 3 or 5 years, then the mortgage company or bank will be forced to cancel the sheriff’s sale and reinstate your mortgage.