Greetings!
We believe that everyone deserves a fresh start. There are legal solutions available that can help you achieve that fresh start. Through this monthly newsletter, it is our goal to offer you information, as well as solutions, garnered over 35 years of combined legal experience practicing bankruptcy law. We understand the seriousness of choosing to file bankruptcy, and we want to give you power through knowledge to help you make that decision. Please contact us for a no-cost consultation.
Sincerely,
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Understanding Chapter 13 Bankruptcy and its Many Benefits
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Chapter 7 and Chapter 13 are the two most common types of personal bankruptcy cases. It seems that most people are more familiar with the benefits of filing a Chapter 7 case, but many do not understand how a Chapter 13 filing can benefit them financially. In many situations, the Chapter 13 process provides a debtor with more flexibility and has more added benefits not available in Chapter 7.
A common misperception about Chapter 13 is that you must pay back 100% of your debt, over an extended period of time. This is not necessarily the case. In fact, many individuals in Chapter 13 pay back as little as 1% of their unsecured debt.
If you have multiple real properties with mortgages in default, if you are behind in your car payments, or if you have sufficient income to cover your living expenses, but not enough to pay your creditors, then Chapter 13 may be the right bankruptcy chapter for you.
A Chapter 13 debtor must file a debt repayment plan that sets forth how the debtor intends to pay his or her creditors. One of the most significant benefits of the Chapter 13 plan is that it allows you to consolidate all of your debts and make one affordable monthly payment. The Chapter 13 trustee collects your payments and distributes the funds to each of your creditors pursuant to the terms of the plan.
Some of the other advantages of a Chapter 13 bankruptcy include:- Some individuals have substantial debt but do not qualify for Chapter 7, based upon their household income. Chapter 13 provides an avenue for these individuals to repay a portion of their debt to their creditors and discharge the remaining debt.
- Some individuals own assets well in excess of the allowable Florida exemption limitations, and do not have the ability to repay a Chapter 7 trustee over a short period of time. Chapter 13 allows these individuals to retain all of their assets, while repaying a portion of their debt to their creditors.
- Individuals who own a business are sometimes hesitant to file Chapter 7, because of the scrutiny involved and the potential to lose their business. Chapter 13 allows for more flexibility and oftentimes allows individuals to retain their operating businesses, when Chapter 7 would bring more uncertainty.
- Chapter 13 allows you to catch up on past-due car payments, mortgage payments, homeowners' association payments, and condominium association payments.The term of a Chapter 13 plan is 3 to 5 years (depending on your household income), which, depending on the arrearage amount, can be a sufficient amount of time to cure delinquent payments and keep possession of your vehicle or house.
- Chapter 13 may allow you to strip or remove the second mortgage from your home if the value of your home is less than the amount owed on the first mortgage. The second mortgage lender can be treated as an unsecured creditor under your Chapter 13 plan.
- For debtors who own investment real properties, Chapter 13 permits you to "strip down" or "cram down" mortgages to the value of each property, and treat the upside-down portion as an unsecured claim in your Chapter 13 plan.
- Chapter 13 may allow you to cram down the loan amount on your financed vehicle to the vehicle's current value if you financed the vehicle more than 910 days before filing bankruptcy.
- Chapter 13 may allow you to cram down the interest rate on your vehicle loan and extend the term of payments over the course of your Chapter 13 plan.
- Chapter 13 can be used to address and pay back-taxes and child support, which are generally not eliminated during a Chapter 7.
- In the Southern District of Florida, Chapter 13 allows a debtor to participate in the Loss Mitigation Mediation (LMM) program, which provides debtors with a forum to engage in a mediation to achieve the modification of a mortgage relating to real property in which they have an interest and are obligated on the promissory note or mortgage.
The above are only a few of the benefits available in a Chapter 13 filing. Everyone's financial situation is different, so it is important obtain the advice and guidance of an experienced bankruptcy attorney at Leiderman Shelomith, P.A. to determine what debt relief option is most beneficial to you.
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Learn More About Zach Shelomith:
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Zach is an avid University of Miami football fan, and it is where he earned his undergraduate and law degrees. He has had season tickets for almost 10 years, and rarely misses a game. This year, Zach and his 2 year old son have started to go to the games together.
Earlier this year, Zach was elected as the Treasurer of the Bankruptcy Bar Association of the Southern District of Florida. He finds the position very rewarding and feels it is an honor and pleasure to serve the bar association.
Zach also had the privilege to speak at the Broward County Bar Association Bench and Bar Conference last month.
Zach is in the process of planning an upcoming seminar next year with the Broward County Bar Association's Bankruptcy Law Section.
Zach would like to offer this legal tip: "Debtors in bankruptcy should realize that bankruptcy is a collaborative process. As your bankruptcy attorney, I am going to have a lot of questions and I am going to ask for a lot of documents. The work involved with filing a bankruptcy case is not one sided and the client must be involved with the process. Doing so leads to a successful result and the payoff - a discharge of your debts - is substantial."
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Can I Keep All of My Property? Will I Have to Pay Back All of My Debt?
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A husband and wife came to see us for an initial bankruptcy consultation. They owned a home in Broward County, but, even though they earned about $60,000.00 per year (under the median income in Florida for a household of their size), they were not able to financially afford to pay the first mortgage payment on their home and their other bills. They owned 4 vehicles, free and clear of any liens, and their personal property was worth $29,154.80. They had $138,667.07 in unsecured debt (mostly comprised of credit card debt and medical bills) and $209,538.82 in secured debt (mortgages on their home).
The couple wanted to file a Chapter 7 bankruptcy, but they were concerned about losing their non-exempt personal property in a Chapter 7. Even though they would have passed the Chapter 7 means test, given the clients' goal of keeping all of their personal property, we recommended that the couple file a Chapter 13 bankruptcy. Since the clients were not claiming their home as exempt, we were able to claim personal property exemptions of $12,000.00.
Even though most under-median Chapter 13 debtors have a 3-year plan to pay their unsecured creditors in bankruptcy, the plan is not limited to 3 years. Under-median Chapter 13 debtors can propose a plan that is anywhere from 36-60 months. Since our clients felt that the 3-year monthly payment would have been too high for them to make, we stretched their payments to 5 years to make them more comfortable.
Our clients will end up paying $15,481.26 to their unsecured creditors over 5 years. Once they successfully make all of the plan payments, they will be discharging a total of $332,714.63.
 Our clients are thrilled that they have a manageable monthly payment!
If you, or someone you know, are considering bankruptcy, but are hesitant to meet with a bankruptcy attorney because you believe that you won't be able to keep all of your personal property or that you will have to pay your creditors 100% of what you owe, please contact our office for a no-cost consultation.
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About Leiderman Shelomith, P.A.
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Leiderman Shelomith, P.A. was founded by Jonathan Leiderman and Zach Shelomith in 2003. The firm quickly built an excellent reputation across South Florida as a boutique bankruptcy law firm, handling both personal and corporate bankruptcy matters, including Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, as well as state court Assignments for the Benefit of Creditors. Ashley Prager Popowitz joined the firm as an associate attorney in 2009.
The firm's attorneys have been recognized as a South Florida Legal Guide Up and Comer, as a Super Lawyer Rising Star for the State of Florida, and as a Florida Legal Elite Up and Comer. Our attorneys are members of the National Association of Consumer Bankruptcy Attorneys, the American Bankruptcy Institute and the Bankruptcy Bar Association for the Southern District of Florida, among other organizations. The firm's attorneys are also frequent lecturers at seminars and community programs, speaking about bankruptcy law to attorneys and the general public.
The firm, Mr. Leiderman, and Mr. Shelomith, are AV® Preeminent Rated Attorney's, awarded by LexisNexis® Martindale-Hubbell®, for having obtained the highest possible peer-review rating for their ethical standards and legal ability.
The firm represents debtors, creditors and bankruptcy trustees in all aspects of bankruptcy cases, including litigation and appeals, handling both liquidations and reorganizations. Our office is conveniently located in suburban Fort Lauderdale, Florida, and is easily accessible from anywhere in Miami-Dade, Broward and Palm Beach Counties. We handle bankruptcy debtor cases across the Southern District of Florida, particularly in Broward, Miami-Dade, Palm Beach and Monroe Counties, and other bankruptcy cases throughout the entire State of Florida.
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