Interviewer: What is chapter 13 bankruptcy?
James Logan: Chapter 13 bankruptcy is a reorganization. It allows you to catch up with the back payments on your car, on your house and basically reorganize and save your property from your creditors.
A Chapter 13 Bankruptcy Can be Utilized to Prevent Repossession or Foreclosure
Interviewer: My house is being foreclosed or my car is being repossessed, how can chapter 13 help me with that?
James Logan: A chapter 13 will immediately stop a foreclosure or a repossession of your car. Once you stop the foreclosure or stop the repossession of the car, we can set up a payment plan to allow you to reorganize and catch up on your payments on your house and catch up on the payments on the car and save your house and save your car. Chapter 13 is a guaranteed way to stop foreclosure and stop the repossession of your car immediately and allow you a chance to try to reorganize and save your property.
Refinancing a Mortgage is a Complex and Time Consuming Process
Interviewer: Can someone just refinance their house to save it from foreclosure?
James Logan: You can refinance to stop a foreclosure but you need to have enough time to do that and it’s generally going to take you 30 to 60 days to do a refinance and many times, if you have a foreclosure often scheduled, you don’t have enough time to actually do a refinance. Also, the economy is not quite where it was 5 or 10 years ago when the economy was really going strong, we did refinance a lot of clients in chapter 13 bankruptcies but after the real estate boom, it collapsed and it became very difficult to refinance people because lending got a lot more difficult. In the next couple of years, things might change and might make it easier to refinance especially where the interest rate’s been so low but the main thing is you’re going to need at least 30 to 60 days to do a refinance. We could also file a chapter 13 and sometimes get people refinanced after that.
People Generally Don’t Know that a Lot of Taxes Can be Wiped Out in a Bankruptcy
Interviewer: Let’s say I owe taxes to the IRS or to the state, how does chapter 13 going to help me?
James Logan: There are two answers to that question. First answer is, a lot of taxes can be wiped out in a bankruptcy, people don’t understand that and they don’t realize that a lot of times, you can wipe out the taxes in a bankruptcy. Another thing is once you owe money to IRS, it never ever goes away but as a general rule, if the taxes are more than 3 years old and you filed all your tax returns and it’s been more than two years since you’ve filed the returns, as a general rule, any taxes you owe that qualify under that, we can wipe out in a bankruptcy. Taxes less than 3 years old in a chapter 13, we can set up a payment plan to pay off those taxes to the IRS adjusting them out of 3 to 5 years. A lot of times, that’ll help people deal with the IRS especially if they have other debts so we can combine them all.
In a Chapter 13, the High Priority Debts like Taxes are Repaid Prior to the Other Debts
Many times, we’ll see people paying off credit card debts and not paying the IRS, which is crazy because you should pay the IRS first because IRS, if it’s got a priority debt, it’s not going to go away whereas the credit card debts are much less important, so it’s much better to pay the IRS first and deal with the other creditors later. So, that’s another advantage of the chapter 13 is when you’re paying money into the plan, you’re paying the most important debts first, the taxes, the back payments on your mortgage and you’re paying the least important debts last which are the credit cards because that doesn’t really matter. If you can’t get rid of your tax debt, you need to pay it off and if you can’t catch up on your mortgage and you want to have a roof over your head, so those are the two most important debts you want to pay off and in chapter 13, they get paid first.