Negotiating More Favorable Loan Terms with a Chapter 13 Bankruptcy
When a debtor files for Chapter 13 bankruptcy, you might hear about them getting more favorable loan terms as part of the bankruptcy case. The actuality is more complicated than that, but it is true that you may be able to have certain loans modified in conjunction with your reorganization bankruptcy case, and it is certainly true that you will have new loan terms for repaying past-due debt. Since the terms of Chapter 13 bankruptcy cases depend on the individual debtor’s financial circumstances, it is essential to discuss any specifics with a bankruptcy attorney. In the meantime, the following information can help to clarify how loan terms change (and how they do not without additional action) in a Chapter 13 bankruptcy filing.
Repayment Plan Terms for Past-Due Debt
One of the major parts of any Chapter 13 bankruptcy case is the repayment plan. Through a repayment plan — which will typically last three to five years, depending on the debtor’s circumstances — the debtor will be able to make up past-due or past-owed debt. In a reorganization bankruptcy under Chapter 13, secured debts must be repaid in full over the course of the repayment plan, and the same is true for priority debts. The total amount of the monthly payment will then depend on the amount of secured and priority claims owed in full, as well as the debtor’s exemptions and other financial factors. Over that period of three to five years, the past-due debts that are required to be repaid will be repaid, and other nonpriority unsecured debts may be repaid in part (depending on the debtor’s circumstances).
Since the past-due debt will be repaid according to the terms of the Chapter 13 repayment plan, there is a change to those loan terms in that the original loan terms do not apply. Instead, the terms of the repayment plan will now apply.
Renegotiating Your Mortgage and Other Loans During Your Bankruptcy Case
While the terms of your repayment plan will alter the loan terms associated with past-owed debt to creditors — you will be repaying that debt according to the terms of the repayment plan — you may want to renegotiate your mortgage or other loans in connection with your bankruptcy case.
Renegotiating the terms of your mortgage, or seeking a mortgage modification, is particularly common in Chapter 13 cases. Since Chapter 13 bankruptcy stops foreclosure with the automatic stay and allows you to catch up on mortgage payments through the repayment plan, debtors often want to seek a modification of the terms of their mortgage so that they can also keep up with mortgage payments going forward. Modifications may include a change in the mortgage duration or interest rate, for example. In addition to mortgages, you may be able to seek a modification of other types of ongoing loan terms during your Chapter 13 bankruptcy case, as well.
Contact a West Palm Beach Bankruptcy Attorney Today
Do you have questions about how the repayment plan in a Chapter 13 case will allow you to catch up on debt, or do you want to find out more about modifying existing loans during your Chapter 13 case? One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller is here to assist you. Contact us today to find out more about how we can help with all aspects of your Chapter 13 bankruptcy case.
Sources:
law.cornell.edu/uscode/text/11
