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Chapter 13 – An Overview for South Florida

A Chapter 13 bankruptcy, or “wage earner reorganization” is available only to individuals with regular income. It requires that the debtor file a plan providing for payment to creditors over a period of up to five years. Or firm has handled many Chapter 13 bankruptcy filings in Broward County and the South Florida area.

The benefits of a Chapter 13 include the ability to stop foreclosure actions and reinstate a home mortgage that is in default, stop IRS collection efforts while payments are made, the ability to retain non-exempt real estate and personal assets, and a broader form of discharge. A Chapter 13 filing may also allow you to strip off second and third mortgages.

There are, however, debt limits in Chapter 13. In order to qualify for a Chapter 13 you must have unsecured debts of less than $419,275.00 and secured debts (mortgages and car loans) of less than $1,257,850.00. If you exceed the limits in either category you will not qualify for the simpler Chapter 13 and may have to file a Chapter 11.

Chapter 13 may be a good choice for individuals with home mortgage problems. It allows significant time to reinstate a mortgage in default. It may allow individuals to retain investment properties and other assets that might be lost in a Chapter 7. It may be the only choice for those with too much income to qualify for a Chapter 7. Call us if you would like to discuss whether a Chapter 13 is right for you. We do not charge for the initial consultation. We are located in Plantation a few miles West of the Fort Lauderdale Federal Courthouse.

Dischargeability of Second Mortgages in Chapter 13

Most individuals are unaware that they may be able to discharge second and third mortgages in Chapter 13. If your home appraises for an amount less than your first mortgage balance you may be able to strip off all inferior mortgages in a Chapter 13. The second (and possibly third and forth) mortgage is considered unsecured and treated like any other unsecured debt. You may only have to pay pennies on the dollar to remove the mortgage. The lender is paid pro rata along with the other unsecured creditors and at the end of the plan the mortgage is stripped off the property. Most unsecured debt is also discharged. Call us to see if you qualify.

Mortgage Modification in Chapter 13

There is a Mortgage Modification Mediation program available in Chapter 13. The MMM program is a structured mediation session with oversight from the Court. It doesn’t require the lender to agree to a modification or deed in lieu, but it forces them to show up at a mediation and it provides a portal to file your documents so the lender cannot claim they were not received. This program has been in operation for several years with good success. One mediator told me he is seeing a 60% success rate.

This article is not intended as a substitute for competent legal or accounting representation, but merely as a guide to help you decide whether you need the services of a licensed attorney or CPA.

David Langley handles bankruptcy cases in Miami, Hollywood, Fort Lauderdale, Plantation, Pembroke Pines, Pompano,Coral Springs, Deerfield, Boca Raton, Delray and West Palm Beach.