Interviewer: Who can qualify for chapter 13? How does one qualify for that?
James Logan: You have to be an individual to qualify for chapter 13. Occasionally, we’ll get people, they own a property and then they have LOC or corporation and so, we can’t file a chapter 13 for them. So, you have to be an individual debtor, you can’t have secured debts, meaning a mortgage in a house of more than million dollars, and you can’t have unsecured debts just meaning the regular credit cards or other back taxes or things like that toeing more than that, 380,000 I think it is now. So, those are the main criteria.
It is Necessary for a Debtor to Be an Individual and They Can’t Have A Debt in Excess of a Million Dollars
You have to be an individual and you can’t have more than million dollars in debts and you can’t have unsecured debts and you can’t have more than 360,000 in unsecured debts. Other than that, anyone can qualify. It doesn’t matter how much you own, many times people can’t file a chapter 7 because they have assets that we can’t protect in chapter 7 and we could always protect that in chapter 13 because a chapter 13 is a reorganization and you don’t have to turn over any of your property to your creditors, which is reorganizing and setting up a payment plan to pay everybody back and get some peace of mind.
A Person Can Obtain Credit with the Approval of the Court when They’re in a Chapter 13 Bankruptcy
Interviewer: Can someone obtain credit while they’re on chapter 13?
James Logan: Quite frequently, we run into a situation where someone needs to buy a car while they’re on a chapter 13. Chapter 13 can last up to 5 years and during that time, your old car will fall apart and die and you’ll have to get a new car, and you can definitely go out and buy a car when you’re in chapter 13. We’ll have to file a motion with the court and it has to be a reasonable car, you can’t go out and get a $900 a month Porsche or something like that but if you buy a reasonable car with a reasonable payment, the court can approve that and you can definitely buy a car when you’re in a bankruptcy.
A Chapter 13 Can Affect a Mortgage or House Payments to a Limited Extent
Interviewer: Can chapter 13 change my mortgage loan or house payments?
James Logan: In chapter 13, unfortunately we can’t do much with the first mortgage on the house. The only thing we can really do is catch up the payments on the mortgage that you may be behind. If you have a second mortgage on the house and the house is worth less than what you owe in the first mortgage, we can strip off or get rid of that second mortgage and you can pay that off just like a credit card, as an unsecured debt but the main criteria with that is that you have to owe more in the first mortgage than the house’s worth. For example, if you owed a $100,000 on a house that was worth 90, we can get rid of any second mortgages, any judgments and other condo liens and things like that. But if the house is worth $150, we would not be able to do that.
A Chapter 13 Bankruptcy Can Definitely Modify Car Loans or Car Payments
Interviewer: Can chapter 13 change my car loan or car payments?
James Logan: Chapter 13, we can definitely modify the terms of your car loan. The one exception to that is you’d have to have owned the car for 910 days which is about two-and-a-half years. The car dealers got that put into the law changed in 2005 and basically preventing people from modifying car loans until they own the car for two-and-a-half years. But once you’ve done that, we can reduce the payments and we can reduce the amount that you owe on the car to devalue the car and we can reduce the interest rate; if you currently have a really high interest rate, we can reduce it down to the market rate which is generally about 5 or 6 per cent. So, yes, we can definitely do a lot with the car loan.