Hello, I’m James Flexer, attorney at the Law
Offices of James Flexer. We have offices in Nashville, TN, Columbia, TN, and Murfreesboro,
TN. Today I’m going to talk to you about Chapter 13 bankruptcy. Chapter 13 bankruptcy normally
allows you to keep your property (such as homes, cars, and furniture) while allowing
you to pay some or all of your unsecured debts (such as medical bills or credit cards) to
the best of your ability rather than at the rate the creditors want you to pay. Chapter
13 bankruptcy allows you to pay your debts at a rate you can afford. In Chapter 13, even
if you’re behind on your car or home payments, you can keep them over the objection of creditors.
This is different from a Chapter 7, where the creditor can take back the car, home,
or furniture if they want to–even if you’re paying for it on time. Now ordinarily, in
a Chapter 7, if you are current on your home or your car, you will most likely be able
to keep them. However, if you are behind, the creditor may require you to get current
before you’d be able to keep them. In Chapter 13, that is not a requirement. Your Chapter
13 plan will help you catch up what you were behind, and it is all figured out into the
payment which we tell you you’ll have to pay. Now in Chapter 13, you can normally lower
your payments on cars or furniture bills quite a bit– sometimes as much as 50%. On homes,
however, the mortgage payment–the regular mortgage payment–stays the same. But you
can catch up the back payments on your house over anywhere from a 24-month period to sometimes
as much as 60 months. For example, if your mortgage payment was $500 per month and you
were three months behind–let’s say $1500 behind– you would still pay the $500 per month,
and then you might take on about $65 extra to catch up the back payments. Now Chapter
13 puts all of your bills into one bill, like a consolidation loan. This comes out of your
paycheck like federal taxes and is then sent to the Chapter 13 trustee. Once per month,
the trustee collects the money and sends it to your creditors. Normally your home and
car–and sometimes the furniture–would get paid first by the trustee. Then after these
secured debts are paid, money is sent to your unsecured creditors. You have up to five years to pay a Chapter 13. While the unsecured creditors are waiting to get paid, they cannot charge
you late charges, penalties, or interest. Sometimes, unsecured creditors only get a
very small percentage of what they’re owed. But if you complete your Chapter 13 plan,
the balance of what you did not pay is discharged or wiped out. We have many plans where debtors
have paid only 1% to unsecured creditors, still been able to keep their car and home,
and get a discharge. For instance, when I say paying 1% to a creditor, what that means
is, for every $100 dollars that a creditor is owed, they would only get $1, and the other
99% would be discharged or wiped out. So as you can see, a lot of times people are under
the mistaken impression that, “Oh, under Chapter 13 I have to pay all my debts back.” That
is not the case at all. Occasionally there are folks who do have to pay 100% back because
they have a tremendous amount of equity in their home, for example. But most of the average
cases, where there’s not excess assets (and we’ll talk about that in a later video), you
are able to pay a low percentage to your creditors, and what you don’t pay gets wiped out. Congress
recognized this, made it the law, and this is what allows normal folks like you to be
able to take what appears to be an unmanageable situation and all of a sudden you’re able
to afford the things you really need to keep. And really, that’s one of the major purposes
behind Chapter 13. Now, your creditors cannot call you at home or work. They cannot send
you letters, they cannot sue you, garnish your wages, or seize your property. They have
to direct all contact through my office only. Even if you were already being garnished,
or there’s a judgment against you, Chapter 13 will stop it instantly. Foreclosures and
repossessions also are stopped instantly with Chapter 13. In addition, the Internal Revenue
Service can be paid through the Chapter 13, many times without penalties or interest.
Sometimes the IRS only gets a very small portion of what they’re owed. But once you finish
your Chapter 13, you will not owe the Internal Revenue Service any money. If you’re employed,
you must pay your bankruptcy through a payroll deduction from your paycheck. This is not
a garnishment, and you cannot be fired or discriminated against by your employer for
filing Chapter 13. Most employers are familiar with Chapter 13 and realize it’s the federal
law. While it is a little more work for payroll, it stops their employees from being hassled
by debt collectors. Do not be worried about a payroll deduction. You would probably have
fellow employees who are already in Chapter 13. Now you do not have to have a regular
job to file Chapter 13. You could be self-employed or have income from Social Security, disability,
retirement, or any other government assistance. The only requirement is that you have a regular
source of income. So if you babysit or house clean but you essentially get regular income,
you would be eligible for a Chapter 13. Chapter 13 bankruptcy has provided peace of mind and
a legal method of dealing with debt for millions of people throughout the United States. It
can do the same for you. I would encourage you, if you’re in the middle district of Tennessee,
to request either pamphlets which we have carefully prepared on Chapter 7 and Chapter
13 or go onto our website, www.flexerlaw.com, and those same materials are on the website,
as well as many other resources about Chapter 13 and Chapter 7. Feel free to call our office,
and we have several attorneys available and ready to talk to you specifically about your
specific case and situations. We can go into much greater detail on the phone than this
video will allow, and certainly we provide a free initial consultation or appointment
if you wish to come talk to us in person. Thank you for your time and attention to this
video, and I’ll be talking to you in future videos.