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Category: Chapter 13
Vehicle ownership and Chapter 13 bankruptcy

On Behalf of O’Brien Law Firm, LLC

Posted on: February 28, 2018

If they have a steady stream of income, debtors in Mississippi may use a Chapter 13 bankruptcy to pay off their substantial debts. They will have three to five years to use their disposable income to resolve their debts. If individuals currently have a vehicle or would like to purchase one during any stage of the bankruptcy process, this still can be achieved. However, there are some factors that have to be considered.

Chapter 13 bankruptcy filers who possess a vehicle before they file a petition may keep their vehicle except in certain cases. If the payments for the vehicle are extremely costly, the court may prevent the debtor from including the payment when calculating their disposable income. The expensive payment may be considered unreasonable as filers are only permitted to retain living expenses that are necessary and sensible.

Debtors who have an upside down auto loan and purchased their vehicle at least 910 days before submitting a bankruptcy petition may opt to cramdown the loan for the bankruptcy process. This allows the loan to be reduced to the amount of the vehicle’s cash value. The excess amount is included with the unsecured debts.

For debtors who are not current with their vehicle payments, filing for Chapter 13 bankruptcy stays most collections, including repossession of the vehicle. The payments in arrears may be included in the bankruptcy plan, and if the debtors make the remaining payments, they may be able to retain ownership of the vehicle.

Individuals who have substantial debt may consult a bankruptcy attorney about their legal options. A lawyer may advise individuals how a Chapter 13 bankruptcy may apply in their case if they have a regular income. People may be advised of how a bankruptcy may help them have a fresh financial start by reducing interest and stopping creditor harassment.

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Borrowing from a 401(k) account to pay off debt

On Behalf of O’Brien Law Firm, LLC

Posted on: January 31, 2018

Households around the country owe an average of $15,654 to credit card companies. Paying down this debt while saving for retirement can be a challenge for Mississippi individuals and families who are struggling to make ends meet, and borrowing from 401(k) retirement accounts to reduce revolving balances may seem like a good idea. Credit card interest rates are generally far higher than those imposed by retirement plans, but there are a number of important factors to consider before taking out a 401(k) loan.

Borrowing from money earmarked for retirement may not be a wise decision if it does not address the fundamental problem. When credit card balances are high due to excessive spending, paying the debt off with 401(k) funds will merely provide a temporary respite if spending habits do not change. However, this kind of borrowing may be prudent when revolving debt balances were caused by events, such as medical emergencies, that are unlikely to be repeated.

A 401(k) loan may not be a good idea for individuals who may change jobs in the near future. Employers usually expect workers who leave to repay these loans within 90 days, and failing to do this could lead to a tax bill and penalty fees. Those mulling this option should also consider the impact that borrowing from a 401(k) account will have on their retirement plans. This is especially important for individuals with 401(k) plans that do not allow new contributions to be made until outstanding loans are repaid in full.

Attorneys with debt relief experience may suggest filing for Chapter 13 bankruptcy to those with unmanageable financial situations who wish to safeguard their retirement savings. Funds in 401(k) plans have protection under bankruptcy law, and individuals who take this option may be able to enjoy the benefits of a fresh financial start without jeopardizing their future.

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A Chapter 13 may be preferable to Chapter 7

On Behalf of O’Brien Law Firm, LLC

Posted on: December 4, 2017

Filing for bankruptcy in Mississippi is typically a difficult decision with plenty of forethought. However, filing bankruptcy can also be a financial silver lining to much of the stress and gloom that may have permeated the filing person’s life.

As explained by the Mississippi Bar, two main options Mississippi residents have when deciding to file for bankruptcy are the Chapter 7 and the Chapter 13 bankruptcy filing. The former is when the person agrees to liquidate assets to help pay the debts while the latter involves a payment plan to pay off the debts, usually at a lower amount.

Chapter 13 benefits

One benefit of a Chapter 13 that is not available under Chapter 7 is that if the filing debtor had a cosigner on any of the debt, that cosigner may be able to receive protection under the Chapter 13 filing. In addition, gaining credit back may be easier in some instances because the creditor who sees the Chapter 13 filing on the debtor’s credit report will understand that the debtor paid more of the debt back than if there was a Chapter 7 filing.

Chapter 13 eligibility factors

To be eligible for a Chapter 13 bankruptcy discharge, the filing person must have less than a quarter of a million dollars in unsecured debt. Unsecured debt includes that derived from credit card use and medical bills.

There must also be less than three-quarters of a million owed on the secured debt. Secured debt includes such loans as a home mortgage and an auto loan.

The filing debtor must have a reasonably steady income that indicates he or she can likely pay at least part of the debts in a three-to-five-year period. If the debtor has no income, he or she will likely not be able to successfully file for a Chapter 13.

Payment plan

Essentially, the filing person will propose a payment plan that uses his or her disposable income each month to pay creditors. As noted, the duration of the payment plan is typically between three and five years. Disposable income includes that which remains after the debtor satisfies basic living requirements, such as food, housing and other necessary bills.

On the down side, Chapter 13 has a higher failure rate because sometimes the debtor finds he or she is unable to fulfill the payment plan.

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