Many Nevada residents who have regular incomes still struggle to keep up with their bills or are behind on their house or car payments. For those individuals, filing for Chapter 13 bankruptcy may be an option. Chapter 13 can be especially helpful if you have fallen behind on your mortgage payments or your car payments and want to catch up while keeping your house or car.
Chapter 13 vs. Chapter 7
Unlike a Chapter 7 bankruptcy, which discharges most of your remaining debts right away, Chapter 13 involves submitting a detailed repayment plan to the court. The repayment plan can take from three to five years to complete. If you stick to the plan and make all scheduled payments, the bankruptcy court will discharge any remaining debt at the end of the repayment period.
Chapter 13 depends on the debtor having some regular source of income. Otherwise, the debtor would lack the means to stick to any sort of repayment plan. Debtors also typically prefer to file for Chapter 13 over Chapter 7 if they have valuable property they wish to keep that exceeds Nevada’s statutory bankruptcy exemptions.
As noted above, a common Chapter 13 filing scenario involves a home mortgage. If you have delinquent home mortgage payments and cannot make them up at the time of filing, you should consider Chapter 13 reorganization bankruptcy.
Under Chapter 13, you can make up any missed mortgage payments to the bank and reinstate the terms of your original loan. Filing for bankruptcy automatically stays (stops) any foreclosure proceedings, which gives you leverage in negotiating with the mortgage lender. Of course, you still have to make your payments, subject to any terms approved by the bankruptcy court.
Secured vs. Unsecured Debts
Not all debts are treated equally in a Chapter 13 bankruptcy. Secured debts have priority. Secured debts include mortgages, car loans, and tax debts secured by a lien on your property. After these debts are repaid in full or brought current, your unsecured creditors may be repaid a percentage of what you owe. That percentage is based on your “disposable income” and whatever assets are available to the bankruptcy estate.
Many of your assets are, in fact, exempt from bankruptcy altogether. Under Nevada law, you can exempt the higher of 75 percent of your weekly “disposable” income or 50 times the federal minimum wage ($7.25 per hour). You can also exempt up to $12,000 in “necessary” household furnishings and one personal vehicle (up to $15,000). Social Security, retirement accounts, life insurance proceeds, and public assistance benefits also are not subject to a Chapter 13 bankruptcy.
It is important to consult with an experienced Nevada Chapter 13 attorney before you file for bankruptcy. A repayment plan is a complex undertaking that will take several years to complete successfully. You need to be fully aware of the risks and obligations. A Nevada bankruptcy attorney will make sure you are not caught unprepared.