Chapter 13 is a type of reorganization bankruptcy in which a debtor restructures his or her debts. It is a good option for individuals seeking to stop foreclosure on their home or real estate, and it also stops vehicle repossession. With help from a Chapter 13 bankruptcy lawyer, individuals can consolidate all their debt, from credit cards to medical bills to delinquent income taxes and student loans.

The process involves the attorney and debtor developing “a plan” to show their creditors how they are going to repay some or all of their debts. Debtors are often given significant breaks or help in the repayment of their debt, and often debts may be paid at pennies on the dollar. Interest rates on certain debts can be stopped all together or often lowered depending on the type of debt you owe, the amount of property you own, and your income level.

Hold off on walking away from your home – or cashing in your retirement savings to pay debt – you may not have too!

Chapter 13 can often be a better option than letting your mortgage company foreclose and take your most important asset.

Individuals falling behind on their mortgage payments or credit cards often try to refinance these debts through yet another loan or even another mortgage. The problem with taking out more debt, a 2nd mortgage, or even a mortgage refinance, outside of closing costs and interest, is that they typically eat up any equity you have left in your home and create an even larger mortgage lien and another monthly payment. Refinancing starts your loan all over again. Don’t take out another loan, second mortgage or refinance and increase your monthly debt.   Otherwise, if you later default on these payments you will actually put your home at risk of foreclosure. Chapter 13 can save your home’s valuable equity.

Chapter 13 offers real debt relief, vs. out-of-state  debt consolidation/settlement companies

Traps for the unwary.  Many people with credit card debt are lured to companies offering to settle with their creditors or consolidate your debts.  I meet with people everyday that regret that decision.  The main reason is that these companies cannot guarantee that the creditors will accept their offers, and sometimes the creditor sells your account to a 3rd party who decides to collect, and even sue you, even while you are in a “repayment plan”. In chapter 13, your creditors cannot opt out of the plan, once your plan is confirmed your creditors are stuck with the percentage you have proposed, and you are legally protected under the automatic stay.    Debt settlement companies can cause just as much damage to your credit rating, as payments are often reflected late if at all.

Mortgage scams – If your mortgage company or a 3rd party is offering you a “way out” while they are threatening or pursuing foreclosure, be very careful. Once a mortgage company has decided to foreclose on your property, they are often not serious about helping you out.   They are interested only in selling your home.   If you find yourself always dealing with a different person, and the mortgage company is not keeping their promises to stop the foreclosure, you need to contact our office immediately.

Bottom line – do not take out a second mortgage, refinance or modify your loan or consolidate with some out-of-state debt settlement company before you talk to us. You should consider all your options first.  You will be glad you did.

Contact Milwaukee’s trusted Chapter 13 Bankruptcy Lawyer, Shane S Cigel, if you are in debt and might benefit from Chapter 13 or other options our firm offers.