In Which Chapter Is No-money-down Bankruptcy Generally Done?
No-money-down bankruptcy can really only be done in Chapter 13. Both Chapter 7 and Chapter 13 give you immediate relief; when you file, an automatic stay is created, which stops your creditors from trying to collect from you, trying to call you, trying to repossess your car, trying to foreclose on your house. The automatic stay is a power of bankruptcy, and you get it with both Chapters, but under Chapter 7, as of the date of filing, no one can ever try to collect, which means, if you have not paid your attorney in full, that debt will be wiped out like all other debts.
Unfortunately, that makes it hard for an attorney to file a Chapter 7 unless he’s been paid in full. However, under Chapter 13, you can put your attorney fees into your re-organization plan, in which you set up payments and pay off creditors through a plan, including the attorney. Since the attorney can still get paid for representing you, you can pay less money upfront; that’s an advantage of Chapter 13 over Chapter 7.
Who Will Benefit?
The no-money-down bankruptcy does not work for everybody; you need to have a steady income, even if the income is a retirement pension, social security or anything else. So, unfortunately, a no-money-down Chapter 13 won’t work for the unemployed.
Two other criteria to have is either tax debt that we can’t get rid of with a Chapter 7 or a car that you’re under water on. One thing we can do in Chapter 13 is to cram down your car loan to the value of the car; that alone may save you more money than you’ll pay your attorney to file Chapter 13, so it’s really a win-win. For example, if you owed $20,000 on a car that’s only worth $12,000, we can cram that car loan down to $12,000, saving you $8,000; far more than you’ll pay an attorney for filing the Chapter 13. We can also reduce the interest rate and save you money there as well.
How Soon Can this Happen?
The advantage of no-money-down is that we can get it filed with less money upfront than normal; in a no-money-down Chapter 13 you only have to pay the filing fee, which is $310, the credit counseling fee of $20 and the credit report fee of $23, for a total of $358. That will get your case filed immediately and stop any repossession, foreclosure or garnishment immediately and begin your fresh start. We can even cram down the car loan and save even more money.
How Long Will this Process Take?
Chapter 13 can run 36-60 months, which is 3-5 years, depending on your level of debt and how much you can afford every month. We’ll calculate it out to get your payments as low as possible and get everything off your back, but once the case is filed, enjoy the relief of the automatic stay, when you get all your creditors off your back and begin your fresh start and you can breathe again.
How Will I Know if I Even Qualify for No-money-down Bankruptcy?
The main qualification is a steady income, and either a car that’s under water or a tax debt that we can pay off under Chapter 13. It doesn’t make a lot of sense to file a Chapter 13 unless they’re under water or behind on car payments. Chapter 13 will stop repossession and allow them to cram down the car loan. People need their car to get to work or to get their kids to school; the ability to file for bankruptcy and keep their car is very important to people.