Chapter 13 of the Bankruptcy Code allows for the reorganization of a person’s debts with their consistent income during the process. It is also known as the salary earner’s plan because it enables a debtor to construct a repayment plan for their debt (typically lasting between three and five years) that is proportional to their income.
In Chapter 13, only secured liens are allowed to remain, whereas unsecured liens are discharged entirely. Only secured liens are valid. Therefore, a borrower who is in the process of arranging themselves to establish a payment plan has the ability, following the completion of their payment plan, to get away from any unsecured liens.
It is critical that, if a creditor sets a lien against any of the property, you have a thorough understanding of the circumstances behind the lien and how Chapter 13 can assist you in avoiding liens on the remaining portions of your property. Your Benenati Law Firm attorney will be able to assist you in comprehending the circumstance and communicating with the creditor to explore the possibility of negotiating a payment plan.
How To Stay Out Of Legal Trouble In Chapter 13
Lien Stripping is a specialized procedure available to debtors under Chapter 13, allowing them to get rid of junior liens such as a second or third mortgage. This is how the process goes.
If any property is placed on a mortgage at the commencement of the repayment period, the value of your property will be determined at that moment. It will not be subject to modification because of this. However, as time passes, the property’s value may decrease, and as a result, the creditor may be able to sell it for a significantly lower price to cover his loan.
You will be shielded against secondary liens if you file for bankruptcy under Chapter 13. This means that a creditor never places a lien on any of your other assets to recoup the full debt.
When filing for bankruptcy under Chapter 13, stripped liens are handled similarly to other unsecured debt and can be readily eliminated once the payment plan has been fulfilled.
The following are the requirements that need to be met by a debtor to discharge a lien, according to Chapter 13.
- Show that they have exhausted all of their financial resources and that the property’s value has increased significantly since they declared bankruptcy.
- They have completed their Chapter 13 repayment schedule by making all required payments per the agreement.
- Ensure that your case is resolved and that you receive a discharge under Chapter 13 to prevent the creditor from reinstating the lien.
Because Chapter 13 does not protect some liens, such as tax liens and other statutory liens, it may be slightly more difficult to get rid of them.
An attorney can assist you in comprehending the problem and discover a means to get around it, regardless of whether you are working with a judicial lien, a voluntary lien, or a statutory lien. In addition, you will understand the choices available to you under the terms of Chapter 13 and the steps necessary to make use of those choices.
You may quickly call your creditor or request negotiations through the Remove a Lien offered by the law firm Remove a Lien. These negotiations may create a debt payment plan as required under Chapter 13.