How To Qualify For Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a type of bankruptcy that is used by individuals who have regular earnings. It allows people with consistent incomes to develop a debt repayment strategy.

What are the main characteristics of Chapter 13 bankruptcy?

In Chapter 13 bankruptcy, debtors may propose a payment plan that would require them to make payments to creditors over three to five years. 

If the debtor’s monthly income is greater than the relevant state median, the plan must be for five years. A plan may not provide for payments over a period longer than five years under any circumstances.  The payment plan will be paid generally through a wage order right from your paycheck.  If you do not have a paycheck, then it can be deducted once a month online through the Trustee’s payment portal or by a bank ACH.

Is Chapter 13 a good idea for my case?

In Chapter 13 bankruptcy, you can ask the court for a debt repayment plan if your unsecured debts are less than $465,275 and your secured debts are less than $1,395,875.

The purpose of a Chapter 13 repayment plan is to make your best effort to repay some or all of your debts over a three-year to five-year period.

Three Restrictions to Chapter 13 bankruptcy filings

  • You may not be eligible for the automatic stay a/k/a the bankruptcy protection, you have had a case dismissed within the last year of the most recent case filing.  In this situation, you will need to file a motion with the bankruptcy court to extend the automatic stay within 7 days after the initial case filing. 
  • You won’t be able to file bankruptcy if, in a prior bankruptcy case, the Judge restricted you through a court order from filing in the future.
  • Another restriction can be if you voluntarily dismissed your previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.  If you attempt to refile a case after the dismissal, the court will not grant you the bankruptcy protection against the creditor that obtained relief from the stay in the prior case. 
  • Unless an individual has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in a one-on-one or group session from an authorized credit counselor, he or she cannot be a debtor under Chapter 13 bankruptcy.

Why is a Chapter 13 bankruptcy filing a good idea?

Individuals who are unable to pay their mortgage installments may be eligible for Chapter 13 bankruptcy, which has several advantages over liquidation under Chapter 7.

  1. The most significant advantage of Chapter 13 bankruptcy is that it allows borrowers to save their houses from being foreclosed. Individuals can file under this chapter and stop foreclosure proceedings, as well as make late mortgage payments over time. They must, nevertheless, make all mortgage payments that are due during the Chapter 13 repayment plan on time.
  2. Another advantage of Chapter 13 is that it allows debtors to only make their best effort payments to the unsecured debts other than their mortgage for their primary home and extend them over the plan’s duration. Making these adjustments might result in lower payments.
  3. Chapter 13 also contains a special provision that protects third parties who are held liable for “consumer debts.” This protection may include co-signers.
  4. You can restructure vehicle loans to be repaid at a reasonable interest rate through the life of the bankruptcy plan.  This can assist you by saving your vehicle from repossession or reducing the monthly payment obligation.
  5. You can discharge and remove unsecured second and third liens on your residence.
  6. Finally, the individual makes plan payments to a Chapter 13 bankruptcy trustee who then distributes funds to creditors. While protected by Chapter 13, individuals will have no direct contact with secured and unsecured creditors.

Bankruptcy basics

Filing bankruptcy with the bankruptcy court

A case under Chapter 13 begins with the filing of a petition with the bankruptcy court that presides over the debtor’s area of residence.

The debtor must file with the court the following schedules and documents:

  1. Assets and liabilities
  2. Current expenditures
  3. Current income
  4. Executory contracts and unexpired leases
  5. A statement of financial affairs
  6. Certificate of credit counseling
  7. Chapter 13 repayment plan


This is just a small sample of the documents that may be required by the Bankruptcy Court. This list is not comprehensive and may not apply to every debtor.

The court has the option of dispensing with particular requirements if it believes them to be irrelevant or excessive in light of all relevant circumstances. A bankruptcy lawyer can help you put together your case easily since they are experts in debt relief options.

Couples who file Chapter 13

A married couple may file a joint petition or individual ones.

Regardless of whether the filing spouse is submitting a joint bankruptcy or separate individual bankruptcy, the non-filing spouse will be required to provide her income and tax information to the bankruptcy court. 

It is essential for the court, the trustee, and creditors to assess a household’s financial condition if only one spouse files.

A qualified bankruptcy lawyer can quantify how much money you have and whether your income exceeds the exceptions, as well as which way to file based on your situation.

Official bankruptcy forms

The official forms may be purchased at legal stationery stores. They can also be downloaded online from this website. The forms are not available from the court.

Information on your unsecured debts and secured debts


The debtor must make a record of all creditors and the amounts and kinds of their claims to file for Chapter 13 bankruptcy. All secured debts, as well as unsecured obligations, must be included. This means you have to include your credit card debt in your car payments and priority debts (i.e., child support, alimony, tax liability).

You must also provide detailed information on the source, amount, and frequency of your revenue, as well as a list of all of your assets.

The court must also be supplied with a thorough rundown of the debtor’s monthly living expenses, such as food, clothing, housing, utilities, medical bills, taxes, and transportation.  The Trustee can also require you to verify any and all of your listed income and expenses. 

Using an expert bankruptcy lawyer to represent you is a time-saver because he or she is an expert and knows exactly what to include in your schedule.

Court fees for Chapter 13 bankruptcy

A $313 filing fee payable to the bankruptcy court is required for all cases unless a special exception is granted by the Court for indigent debtors. The fees generally must be paid to the court clerk when you file, but the Court does allow it to be paid after case filing in multiple installments.  Your case may be dismissed if you do not pay the filing fee on the installment plan.

Important note on court fees  

Bankruptcy laws establish clearly that debtors should be aware that failure to pay these charges may result in their case being dismissed, no matter what their financial situation is.

The court-appointed trustee

When someone files for a Chapter 13 bankruptcy, an impartial trustee is appointed to oversee the case. In some districts, the U.S. trustee or bankruptcy administrator appoints a standing trustee who oversees all cases.

The trustee investigates the claim and acts as a disbursing agent, collecting payments from the debtor and sending funds to creditors.

Automatic stays

Once the petition is filed, it immediately stops most debt collection activity against the debtor or the debtor’s property. In certain circumstances, the stay may be only temporary. The stay takes effect automatically as a result of the operation of law, with no need for judicial intervention, unless you have had two bankruptcy cases dismissed in the last year preceding the filing of your third case.

Creditors may not start or continue lawsuits, wage garnishments, or even make phone calls demanding payments as long as the automatic stay is in effect.

All creditors whose names and addresses are provided by the debtor are notified of the bankruptcy case by the bankruptcy clerk.

Co-debtor automatic stay

There are also special automatic stay provisions to protect co-debtors in Chapter 13. A creditor may not seek to collect a “consumer debt” from someone legally responsible to the debtor unless the bankruptcy court permits it.

Hardship Discharge

Circumstances may arise later that prevents a debtor from following through on his or her plan. In such instances, the debtor or their bankruptcy attorney might ask the court for a hardship discharge.

In such circumstances, if the debtor’s failure to make plan payments is due to factors beyond his or her control rather than any fault on the part of the debtor, a hardship discharge is only available if it can be shown with reasonable particularity.

A hardship discharge can also occur if creditors have received at least as much as they would’ve in a Chapter 7 liquidation case, and modification of the plan is not an option.


What is a secured debt?

Home loans and automobile loans are examples of secured debt. The loan is secured by the vehicle or home, which means that if you don’t repay the debt, the creditor may repossess the car or seek foreclosure on the house.

What is an unsecured debt?

A credit card debt, a student loan, and personal loans are all examples of unsecured debt. If you default on your student loan, the government won’t seize your house because no property has been put up as collateral.

Can Chapter 13 bankruptcy stop foreclosure?

As soon as an individual files a Chapter 13 petition, the automatic stay prohibits the foreclosure procedure from continuing. The homeowner might still lose the property if the mortgage firm completes the foreclosure sale under state law before the debtor files a petition. 


Five Questions To Ask A Bankruptcy Attorney

If you are thinking about filing for bankruptcy in Michigan, you need to know a few things. Bankruptcy is a process that has certain requirements. It can also determine different situations in people’s lives.

Each person’s financial situation is unique, and the specifics might vary significantly.  Discharging or reorganizing your debts can provide relief, but it’s important to understand what this process entails.

Your bankruptcy attorney should be able to provide you with an honest opinion of whether filing for bankruptcy is the best solution to your financial problems. A good law firm will never propose it if it isn’t appropriate for you.

In the United States, who is in command of bankruptcy laws?

The US Constitution gives the US Congress the power to make laws about bankruptcy for the whole country.

Legislators have passed several laws about bankruptcy. The most recent law is The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This law governs how bankruptcy works in our country.  Additionally, each state has the right to make its laws as it relates to the state-allowed exemptions you are entitled to in bankruptcy.

And across the country?

There are 90 districts for bankruptcies across the country. The bankruptcy courts have their own offices which clerks run.

The United States bankruptcy judge is the court official with decision-making authority in federal cases, which are heard in the United States Bankruptcy court.

Five questions for your initial consultation with a bankruptcy lawyer

First of all, remember that most law firms offer a free consultation before you hire them for a bankruptcy case.

A free consultation helps you decide before hiring a bankruptcy lawyer because you can ask some important questions that can make all the difference for your entire process before showing up at the bankruptcy court.

Question #1 Do you recommend filing bankruptcy in my case?

While the circumstances may appear comparable, each person’s circumstance is unique. Any bankruptcy lawyer must be able, according to his or her experience, to give you an honest assessment as to whether you should file for personal bankruptcy.  This assessment can be very accurate so long as you, the client, are providing accurate information regarding your entire financial/asset situation.

Question #2 How do I prevent my bankruptcy case from being dismissed?

Bankruptcy cases can be dismissed for a variety of causes, including fraudulent conduct (such as embezzlement) and the failure to submit the necessary documentation to the court.

When you submit your papers, you must tell the truth and provide complete financial information. This includes any investment or real estate holdings, as well as other income sources and assets.

If you make a fraudulent statement on your paperwork or otherwise try to defraud the system, the court will most likely reject your application and issue a denial of discharge. You may also be prosecuted by the department of justice for committing a crime.

In most cases, to qualify for bankruptcy, your disposable income must be lower than the state average based on your family size. This is called the means test. The test compares your yearly income for the six months beforehand against that of a typical family in the state.

All debtors are required to complete a credit counseling course before bringing a claim and a debt management course before obtaining a discharge, according to the law.

When you complete each course, you’ll get a certificate of completion to submit to the court. If neither certificate is submitted, your case will be dismissed or you may not receive your discharge in bankruptcy.

Question #3 Which type of bankruptcy is the best for my case?

A bankruptcy lawyer can’t respond to this without first considering your property and debt types. You’ll also need to explain how much money you make.

Chapter 7 bankruptcy 

Chapter 7 bankruptcy can help people who do not have a lot of money and who can protect their property with bankruptcy exemptions after considering the non-exempt assets.

One of the benefits of Chapter 7 is that it is over in about four months. However, any property that is not covered by a bankruptcy exemption will be sold to pay off your creditors according to the bankruptcy code.

Chapter 13 bankruptcy 

Individuals with a steady income who can pay creditors over a three- to five-year repayment plan are eligible for Chapter 13.

It’s a fantastic tool for debt relief and reorganizing, as it can help individuals catch up on their mortgage and vehicle payments. You may keep all of your property in Chapter 13 as long as you can repay creditors the amount of money owed on the exempt property through the plan.

According to the bankruptcy code, the average duration of a Chapter 7 bankruptcy is three months, whereas Chapter 13 bankruptcy usually lasts three to five years because it is a debt repayment program.

Means test

The main objective of the means test is to force higher-earning debtors to repay part or all of their debt through Chapter 13 rather than allowing them to do so through Chapter 7.

All property that a Chapter 7 filer can’t protect with an available exemption may have that property sold by the Chapter 7 Trustee to use those sale funds to repay the bankruptcy creditors you listed in your case. . Most filers who have a choice choose Chapter 7 unless they own an important non-exempt property they want to keep.

Question #4 What is the real cost of bankruptcy (and are there additional costs)?

If you are going through this process, the costs include:

  • credit counseling course fees
  • court filing fees
  • bankruptcy attorney fees (unless you file on your own)

Filing fees are the same throughout the country, but attorney charges vary depending on where you live, the complexity of your case, and the attorney.

Unless your attorney’s fees fall below the so-called “no-look” level that is recognized as reasonable, your court will evaluate them in Chapter 13 bankruptcy. The level of legal fees varies from one district to another, so check with your local court before hiring an attorney.

You should feel confident that one attorney is never your only option. Do not be afraid of paying higher fees to your lawyer when filing for bankruptcy if that will give you peace of mind.

Question #5 Will I be able to eliminate all of my debts?

A bankruptcy attorney will be able to tell you if you can discharge or get rid of credit card obligations, medical and utility bills, personal loans, back rent, and other debts.

In other situations, debt relief may include getting rid of your mortgage and automobile payment, but you must return the property to the creditors if you don’t fulfill your obligations as agreed.

Although you may not be able to eliminate other debts, such as child support obligations or educational loans in most cases, and tax debt incurred recently, you might still be able to negotiate a settlement.

Expect your lawyer to inquire if you have any non-dischargeable obligations. You can get a head start by checking out this list of debts that you cannot discharge.

Finding an experienced bankruptcy lawyer

If you are thinking about going through a bankruptcy process, though you can do it on your own, it is advisable to look for a law firm that is practicing bankruptcy law.

Screening prospective bankruptcy lawyers is the first stage in choosing one. You need to interview a few bankruptcy attorneys to find the right one for you. Make sure you find someone who you feel comfortable with and who understands what you’re going through.

Alternative options to finding a bankruptcy attorney

Most law firms also have their contact at your local bar associations, but it is not the only one.

Websites that can assist you in locating bankruptcy lawyers abound on the internet, but traditional approaches are still beneficial. Inquire with neighbors, as well as friends and relatives.

Some websites that can help you find a good attorney to file for bankruptcy are:


How long does it take to file bankruptcy in Michigan?

The time it takes to complete a case is usually 4-5 months, but, once the case is filed, the court’s protection is immediate. This implies that creditors will not contact you again, send you letters, seek money from you through collections, or file legal actions such as wage garnishment.

What are the consequences of filing bankruptcy?

Bankruptcy may have a negative influence on your immediate monetary situation. After bankruptcy, obtaining credit might result in higher interest rates. Obtaining credit after filing for bankruptcy may necessitate security deposits.

Should I close my bank account before declaring bankruptcy?

It depends on the type of account held, (i.e., through a credit union or a traditional bank) and whether you still owe money to the banking institution.  You’ll need to open checking and savings accounts with a bank that doesn’t deal with any of your debts to file bankruptcy. You don’t have to terminate other accounts. leave them open and report them or have your lawyer do it.


Will Filing Bankruptcy Stop Wage Garnishment?

Filing bankruptcy stops most wage garnishment and also prevents creditors from obtaining new garnishment orders against you. When you file bankruptcy, an “automatic stay” is issued automatically.

Wage garnishment enables creditors to take money from your paychecks when you stop making payments to them. Every state, including Michigan, has a prescribed legal method for seizing wages that debtors must follow.

What is wage garnishment in Michigan?

A wage garnishment is a legal procedure in which your employer is required by court order to withhold your earnings to pay a debt, such as child support.

If you don’t pay your debts, the people you owe money to may take up to 25% of your paycheck to recoup what you owe. This is called wage garnishment.

Wage garnishments do not include situations in which employees consented to their employers turning over a portion of their earnings to creditors as part of an agreement.

A creditor in Michigan can take whatever is left of your salary after all debts are paid. This might mean up to 25% of your disposable earnings or the number of your disposable earnings that is more than 30 times the federal minimum wage ($217.50 in a 2021 figure).

Will Chapter 7 bankruptcy stop the garnishment?

If you have your wages garnished, filing for Chapter 7 bankruptcy will generally prevent the garnishment (also known as wage attachment) from continuing.

Because of the automatic stay, most creditors are unable to continue with collection procedures during your bankruptcy case.

What is an automatic stay?

The automatic stay is a provision in the U.S. Bankruptcy Code that prevents creditors, collection agencies, and even some government departments from attempting to collect debts while your bankruptcy case is ongoing.

The major goal of an automatic stay is to provide you with some time and breathing room while the trustee oversees your case and examines your bankruptcy petition.

Chapter 7 and Chapter 13 bankruptcy with the automatic stay

The automatic stay is triggered when filing for bankruptcy, either Chapter 7 or Chapter 13 bankruptcy.

The automatic stay forbids most creditors from continuing with collection activities, which can be beneficial to both debtors and their lawyers (who may charge less than usual fees), as well as allowing debtors the opportunity to regroup during bankruptcy.

There is also a special automatic stay provision in Chapter 13 bankruptcy that protects co-debtors, such as co-signers on loans, from collection efforts.

Exceptions to the automatic stay

There are a few exceptions to the automatic stay and generally include cases of child support, student loans, and taxes. A creditor cannot take your next paycheck without first filing a lawsuit against you, winning the case, and obtaining a court injunction.

Domestic assistance obligations are not wiped out (discharged) in bankruptcy, so the creditor may not stop a garnishment while the case is pending, and most bankruptcy courts will not demand it.


Should you hire a law firm if they are garnishing your wages?

A creditor may seize a portion of your pay as part of wage garnishment to reimburse obligations you owe.

If you have debts that have been reduced to a judgment or taken by administrative orders, your wages may be garnished to pay them back. This includes child support, spousal support, back taxes, and student loans.

Whether you should hire an attorney or handle the garnishment some other way is determined by a variety of things, such as whether you don’t owe the debt or the legal costs will exceed the amount of your debt.

If you are dealing with an unsecured debt, it’s possible that having a lawyer issue a free evaluation for your case will be beneficial at times. Sometimes, if the creditor is taking too much or if you want to work out other payment alternatives with your lender, obtaining a legal opinion can assist.

If your employer is threatening to fire you because of the garnishment or if the creditor is attempting to get around the wage exemption by seizing a bank account, an alternative is for attorneys to evaluate your case and might give you alternatives.

Bankruptcy as an alternative to stopping wage garnishments

It’s important to note that while bankruptcy stops most wage garnishments, it does not cancel them entirely.

If you’re being wage garnished, you may be wondering if you can avoid it. In certain circumstances, doing nothing and allowing your wages to be garnished until the debt is paid is the wisest path forward.

It is critical to remember that a garnishment can be challenged at any time, regardless of whether the debt was incurred in good faith or not. However, it may be prudent to contest the garnishment (or amount) on your own, negotiate with the creditor, or hire a bankruptcy attorney at other times.

Let attorneys evaluate your case (in most cases they will do it for free!)

A bankruptcy attorney-client relationship is a confidential relationship that will put in the hands of your lawyer what actions should be taken with all your creditors. You can let your bankruptcy lawyer talk to government entities, as well as whoever is about to garnish your wages.

If it is a good idea to do a bankruptcy filing, after a free bankruptcy evaluation, most lawyers will give you their opinion and the pros and cons of a person who can file for bankruptcy (if that is you).

Remember all sensitive or confidential information is safe and necessarily secure in your attorney’s hands in case of a bankruptcy case to stop wage garnishment.

Can I have multiple bankruptcy filings and stop a garnishment order?


Yes, you can. Even if you don’t get a discharge, a second bankruptcy filing may be useful. You may not need a discharge depending on the situation. Sometimes you need just more time to pay off your debt.

Imagine you owed federal taxes that you couldn’t pay off in bankruptcy, and you couldn’t come up with a fair repayment plan. To avoid wage garnishment, you may file for Chapter 13 bankruptcy and stretch out the payments over a five-year Chapter 13 bankruptcy payment plan.

If you are thinking about filing for bankruptcy for a second or third time thinking that bankruptcy stops wage garnishment under the federal law, it is recommended to seek the help of a lawyer that can advise you on the benefits of another bankruptcy filing.

What happens to a domestic support obligation during bankruptcy?

A domestic support obligation is any debt incurred by a spouse, former spouse, child, or government entity before or after a bankruptcy filing that is owed to or recoverable by a spouse, former spouse, child, or governmental unit in the form of alimony, maintenance, or support.

The terms of a divorce decree, separation agreement, property settlement agreement, court order, or administrative decision are all valid sources for these obligations.

Section 523(a)(5) of the bankruptcy code exempts domestic support obligations from discharge, regardless of whether the case is filed under Chapter 7 or 13. Even after the bankruptcy case is finished, child or ex-spouse support obligations continue to exist.



I received my bankruptcy case number today. Does that stop a wage garnishment immediately?

The automatic stay is automatically effective once the bankruptcy case is filed, and it demands that all collection calls, lawsuits, and wage garnishments stop immediately. The bankruptcy court may impose severe fines and penalties on creditors who continue to collect after the entry of an automatic stay.  However, you may not get the full benefit of the automatic stay on a second or third bankruptcy filing. 

What are the most wages that can be garnished?

The law limits the amount that a judgment creditor may collect from your wages if it is garnishing them. The percentage of your disposable income that can be taken is limited to 25% of your total income, or the dollar amount that your income exceeds 30 times the federal minimum wage, whichever is smaller.  However, governmental units may be entitled to an even higher garnishment amount.

Can my bank account be garnished without notice in Michigan?

A creditor can use garnishment to collect money from a garnishee. In Michigan, money may be taken from salary and other incomes, as well as bank and credit union accounts.  The only notice you will receive is the notice from the Court that a creditor has filed a writ and request for garnishment.  If uncontested, then the garnishment can happen after that at anytime and without further notice.

What assets are protected from garnishment in Michigan?

Money cannot be garnished if it comes from Social Security benefits and disability payments, Military Annuities and Survivors’ Benefits, Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S., State Disability Assistance, Individual Retirement Accounts (IRAs), income benefits under the Michigan Civil Service Act and the Michigan Retirement Act, and ERISA pensions, among other places.  However, beware that once that money goes into your bank account, it still may be garnished by a creditor and you will now need to begin dealing with the creditor to have them return those funds after you prove the funds garnished were actually protected funds.


After Bankruptcy, Are Mortgage Loans Possible?

It is feasible to get a home loan after bankruptcy. However, the length of time you must wait after your bankruptcy is dismissed or discharged depends on the type of bankruptcy and the loan you took.

FICO says that bankruptcy can damage your credit scores by anywhere from 130 to 240 points, depending on the circumstances. Lenders are often happy about helping borrowers re-establish themselves through several processes, like refinance, after bankruptcy.

If you want to buy a house after going through bankruptcy, it’s vital to understand how the bankruptcy process affects your chances of obtaining a home loan as well as which mortgage companies and loan amounts are open to you.

Mortgage options after bankruptcy

After bankruptcy, obtaining a new mortgage might be difficult, but it isn’t impossible. Many lenders require set criteria for people who have emerged from bankruptcy, completed a waiting period, and fulfilled other eligibility requirements.

Higher interest rates and a costlier mortgage are possible after bankruptcy. Improving your credit score can help offset this.

The right lender will give you a lot of payment options and will talk about the different mortgage programs so you feel safe about asking for a mortgage. If you’re considering getting a mortgage after bankruptcy, read through this article to learn more about a mortgage after bankruptcy.

When you file for Chapter 7 bankruptcy and go to bankruptcy court and receive your discharge, then all of your old unsecured debts are discharged or what may be referred to as canceled, allowing you the financial ability to pay off any new obligations.

Before taking on any new debt, it’s important to keep in mind your financial situation and make sure your monthly income is enough. Not all creditors will be as prompt to offer a loan, particularly if the amount is significant, and the interest rate might go up.

Prepare a written explanation of your financial issues and what you’ve done to avoid such problems in the future when seeking potential lenders. Prepare two years of tax returns, recent paycheck stubs, banking account information, bankruptcy discharge papers, a list of liquid assets, and a written description of your financial difficulties and what you have done to correct them.


Waiting periods for government-backed loans after a recent bankruptcy

Each loan type has its own guidelines for how long you must wait after a bankruptcy. Remember these will not count as a conventional mortgage. You have to wait for an appropriate waiting period.

To qualify for a waiting period, some loans require the borrower to prove that they had a one-time event that caused them to lose income and that it was something outside of their control.

Furthermore, the candidate must demonstrate re-established credit, which means no major negative items on his or her record since the bankruptcy.

If you default on a government-backed loan, you may be added to the CAIVRS (Credit Alert Verification Reporting System) database. The CAIVRS issue must be addressed to obtain another government-backed loan.

Fortunately, you may appeal the status of your CAIVRS findings once you have received them. Many people who are in the system do qualify to be removed.

It might take some time to appeal your CAIVRS denial. If you have any questions regarding your status. Bankruptcy attorneys can help their clients clear questions up before beginning house shopping. It’s always a good idea to get a mortgage pre-approval before looking for houses, regardless of the circumstances.

FHA loans after bankruptcy

The borrower must wait a minimum of two years after Chapter 7 bankruptcy before they can get a loan from the Federal Housing Administration (FHA). Borrowers may also have a longer waiting period, depending on what the mortgage lenders require.

Under FHA rules, a complete explanation must be supplied with the application for an FHA home loan. After Chapter 7, borrowers must financially qualify, show a track record of good credit history in the wake of the filing and fulfill other FHA requirements to obtain a new FHA-insured mortgage loan.

If you have been discharged from a Chapter 7 bankruptcy in the last two years, other lenders may be willing to work with you. However, it is important to note that the waiting period begins from your discharge date, not the time it is filed.

FHA rules permit a mortgage lender to consider an FHA loan application from a borrower who is still making payments in Chapter 13 bankruptcy only if the mortgage payment has been verified for at least one year. The written permission of the court trustee is also a necessary condition of the policy for mortgage approval.

To get home loans, borrowers must write a letter explaining the bankruptcy and submit it with the loan application. Borrowers must have a minimum credit score, a good job history, and other financial qualifications that might differ from those of a conventional loan.

VA loans after bankruptcy

After two years, lenders typically wait another two years before accepting you for a Chapter 7 bankruptcy. With a Chapter 13 filing, you may be eligible for a VA loan just 12 months after the date of filing.

It can take up to 10 years for a person’s credit score to recover after something bad happens. If your credit score is low, you might have to work hard to fix it.

The good news is that for VA borrowers, you will need a lower credit report than what you’ll need for conventional or even FHA financing.

USDA mortgage loan after bankruptcy

In most cases, the USDA loan bankruptcy waiting period following Chapter 7 bankruptcy is three years.

If you want to keep your homeownership, a Chapter 13 bankruptcy may be an option for you. This implies that instead of having to sell off your assets, you can submit a payment plan that will allow you to repay debts over three to five years.

Fannie Mae and Freddie Mac mortgages after bankruptcy


After the bankruptcy, Fannie/Freddie loans demand a four-year waiting period; however, under exceptional circumstances, these lenders will approve mortgages on a case-by-case basis after two years.

Fannie Mae requires a four-year waiting period following a Chapter 7 bankruptcy action’s discharge or dismissal date. If mitigating circumstances can reasonably be confirmed, it will allow for a two-year delay.

Remember it is important to keep up to date with the latest mortgage news because debt relief programs, waiting periods, credit scores, interest rates, and mortgage application rules might change from one day to the next.

Bankruptcy might help you get rid of a second mortgage

Many people have a second mortgage on their property. In several of these situations, the loans were not taken because the borrower was experiencing financial problems.

What happens to a second mortgage after bankruptcy?

Second mortgages can be used to assist someone in financial distress, but they are also an investment instrument that allows you to borrow against the equity in your house.

Is bankruptcy a good option to get rid of a mortgage?

Sometimes a family purchased a house that they could afford, took out another mortgage, and discovered that they were unable to pay their monthly obligations. In these situations, bankruptcy may be the best solution when dealing with foreclosure concerns that include another mortgage.

Many bankruptcy attorneys have assisted homeowners in eliminating this other mortgage and halting foreclosure proceedings on their house by utilizing a bankruptcy provision that allows them to do so.

Is bankruptcy a way to get rid of my mortgage debt?

There are different types of bankruptcy, and depending on which one you qualify for, some or all of your debts may be forgiven. However, most homeowners don’t file for Chapter 7 bankruptcy because they want to keep their homes.

However, it is possible to use bankruptcy to get rid of the next mortgage when you file for Chapter 13 bankruptcy. This is different from getting rid of your first mortgage.

When a person has no equity in their home, another mortgage is considered unsecured debt. It is considered unsecured since the value of the home does not equal or surpass the amount owed to the first mortgage company.  In this instance, a Chapter 13 case via an adversary proceeding can effectively remove the second mortgage obligation if you complete the chapter 13 case.

The good news is that bankruptcy can help you restructure your obligations and free up cash to pay off outstanding bills. For people who are underwater, meaning they owe more in mortgage debt than their home is worth, bankruptcy may be an especially beneficial tool.

When their Chapter 13 payment plan is completed, the other mortgage will be canceled, and they’ll have the option of restarting their lives in a house with a mortgage that better reflects the property’s value.


Can Utility Bills Be Included In Chapter 7 Bankruptcy?

Even if you have fallen behind on your utility bills, filing for Chapter 7 bankruptcy might be able to keep your utility services connected, including electricity, gas, water, or phone.

Utility debts are typically discharged or wiped out in bankruptcy. If you owe back payments on utilities and file for bankruptcy, the utility provider is not permitted to alter, refuse, or terminate your service.

Utility services cannot be denied in a bankruptcy

Because it is not covered by the automatic stay in bankruptcy, this restriction is located in a different part of the bankruptcy code. It also bans utility companies from shutting off or denying service to you just because you filed for bankruptcy.

Unsecured debts, such as overdue utility bills, are wiped out in Chapter 7 and in Chapter 13. Babi Legal Group can help you while filing bankruptcy to fully understand what happens to delinquent utility bills.

What happens to past-due utility bills after bankruptcy?

You will need to convince the utility company that your payment assurance is good enough so they will not turn off your power or you will need to get the court to order the utility to accept your payment assurance.

The bankruptcy law is unclear about whether the utility can cut off your service after 20 days unless it asks for court permission first. A bankruptcy attorney can guide you through the steps that provide adequate assurance for you in the bankruptcy court.

Most utility companies will simply just refuse to service you, but in most cases, if you file bankruptcy on outstanding utility debts, then the utility company upon filing a bankruptcy case, will establish a new account for your service and include the old account in the bankruptcy.  The catch is that the utility company can now require you to pay a security deposit towards the new account and service before they continue to serve you.

Act soon

Do not wait until the last minute to take care of the issue of whether you have enough money to keep your home. If you hire a bankruptcy lawyer, work with them so that you do not lose your services.

Will my utility company shut my service off after bankruptcy?

No, they cannot do that. Chapter 7 bankruptcy may provide immediate relief if you are facing a utility shut-off, such as your gas or electricity.

If the utility bill is overdue and they have already disconnected your service, they will be required to reconnect it. Utility providers also cannot harass you for payments.

How to keep the utility company providing the utility service?

However, to keep the service running, you must provide acceptable assurance that you will be able to pay future utility expenses within 20 days of filing.

Cash deposits, letters of credit, certificates of deposit, surety bonds, and prepayment of utility expenses are examples of adequate assurance.

Under the Bankruptcy Code, consumers are protected from post-petition service disconnection by ensuring that utility providers have adequate assurance of payment.

How many days do I have until a utility shut off after bankruptcy?

According to bankruptcy schedules, you must show the utility company that you will be able to pay future utility bills within 20 days of filing bankruptcy.

This is referred to as giving “sufficient assurance,” and if you don’t follow this procedure, the utility provider can cut your service – even if your debts are ultimately settled through bankruptcy.

How can I provide adequate assurance in my bankruptcy case?

A letter of credit may suffice. A cash deposit, a surety bond, or even a certificate of deposit might also be provided as assurance.

What if my utility company asks for the adequate assurance I cannot give?

If you and your utility company can’t agree on whether or not your payment assurance is sufficient, you may seek the assistance of the bankruptcy court through a lawyer. The deposit amount may be modified after negotiating with the lawyer that represents you as once the issue is brought to the Court’s attention a Bankruptcy Judge can order the utility company service the account on different terms.

What happens to the future utility bills I owe to utility companies if I am filing for bankruptcy?

To begin, verify that your outstanding utility expenses are listed on your bankruptcy plans.

Your attorney will send a letter to the utility company, which will notify them that you’ve filed for bankruptcy. This will ensure there is no utility shut-off because of your pre-bankruptcy utility bills.

The utility company cannot try to collect past-due utility bills after you file bankruptcy protection. Then the law prohibits utility companies from making phone calls or contacting you for assurance of payment as this violates the bankruptcy automatic stay provision that protects the person filing for bankruptcy.

Don’t forget you still have to pay future utility bills

Even if you filed for bankruptcy, any services you receive after the filing will still be subject to new utility costs.

If you don’t pay, the energy provider may attempt to collect your new liabilities or turn off your service.

Why file for bankruptcy within an attorney-client confidential relationship?


If you want to request adequate assurance that you are filing bankruptcy correctly within the federal law, we recommend you do not go to a debt relief agency. Unlike a serious attorney-client relationship, these agencies cannot guarantee to keep your sensitive or confidential information safe.

Benefits of filing bankruptcy with a bankruptcy lawyer

On the other hand, bankruptcy attorneys evaluate every aspect of the bankruptcy process with you. They will go with you in your bankruptcy case to understand how to handle your past-due utility bills and prevent the companies from shutting off their services.

How to find the best bankruptcy lawyer?

We recommend you do not do a zip code search for a top-rated bankruptcy attorney and conduct a few consultations to determine who you feel most comfortable with assisting you in your case. The best way to find a serious law firm is by recommendation or by getting a free evaluation where the attorney explains everything she or he has to offer you in respect to their future service towards bankruptcy protection and in front of the bankruptcy court.


Can You Refinance After Covid Forbearance?

What Is Covid Mortgage Forbearance and How Does It Work?

A loan servicer or lender may delay, suspend, or lower your mortgage payments via a mortgage forbearance. During this period, the bank also agrees not to start foreclosure procedures.

Homeowners with a federally backed mortgage who are experiencing Covid 19 pandemic-related problems could apply for an 18-month forbearance up to Sept. 30, 2021.

What Happens After Covid Forbearance Ends?

The CARES Act’s deadlines are fast approaching. Many homeowners who went through Covid forbearance agreements are now finding themselves stuck with expensive mortgage payments. This could be a huge setback for people who are just starting to get back on their feet.

Thinking About Refinance?

If the homeowners miss payments, they will need to make them up. The missed payments may be put off until the end of their mortgage term or added to the mortgage balance. In these cases, a refinance might help.

Many homeowners can lower their monthly mortgage payments or reduce the length of their loan and make the loan less risky for both the borrower and lender by taking advantage of today’s low-interest rates.

Rules For Covid Refinancing

Now that we’re in a pandemic, the rules are different. How soon you can refinance after forbearance ultimately depends on your loan type.

Freddie Mac and Fannie Mae loans

If you do not know if either Fannie Mae or Freddie Mac owns your loan, you can search them through these links:

To refinance your Fannie Mae or Freddie Mac, you must make at least three consecutive on-time payments following your forbearance term. You can then refinance the complete loan, including any missed payments, into a new loan.

FHA loans

Borrowers with FHA loans, like all other loan types, must refinance their mortgages. To refinance, FHA borrowers will need to get out of their forbearance plans. Borrowers must make three consecutive on-time payments before applying for a new loan is accepted.

To refinance your loan and get cashback, you’ll need to have made at least 12 consecutive payments after finishing your forbearance period.

If you want to explore a streamlined refinance, lenders will expect you to have made six or more consecutive payments.

USDA and VA loans

Contact your loan servicer using the Mortgage Electronic Registration Systems to review your options after forbearance.

After a period of deferment, VA borrowers may be eligible for a loan modification. There’s also a chance that USDA borrowers’ monthly payments might be delayed until the end of their loan term.

If you were unable to continue making payments during forbearance, you will be able to refinance your mortgage after 3 months have passed and 3 consecutive mortgage payments have been made.

Why Go Through Refinance With A Lawyer?

No two borrower circumstances are alike, especially when forbearance is taken into account. That’s why it’s critical to understand your financial situation and long-term goals hand in hand with an expert before applying for a refinance.

There’s never been a better moment to refinance your mortgage. Those who qualify may save hundreds of dollars each month.

Go Through Refinance With A Forbearance Attorney

There are regulations to follow if you’ve been in forbearance. An expert law firm can help you figure out your best options and make sure the process goes as smoothly as possible.

To be eligible for a new loan, you must make three months’ worth of payments before being released from hardship. These circumstances might cause issues if not handled properly.

You must make your payments on time. If you make three payments on time, you can refinance.

If you put your loan on forbearance, you must notify the lender and prematurely terminate the suspension. When this happens, you’ll want to get in touch with your lawyer.

An attorney might also assist you in avoiding making another error by not simply getting a letter, but having your property evaluated, and so on.


Do self-employed borrowers have trouble obtaining loans?

Lenders put in place new policies during the pandemic. Some of these policies were for self-employed borrowers. These borrowers will now see some of these policies phased out. However, self-employed borrowers still require more work to be approved.

How much money could you save by refinancing your mortgage?

If you are considering refinancing, a new home loan at today’s historically low mortgage rates could save you a lot of money.

If you refinance your 30-year fixed-rate mortgage in 2020 when mortgage rates are at all-time lows, Freddie Mac found that you would save an average of $2,800 each year.

According to the report, refinancing your mortgage can lower your mortgage rate by more than 1%.

What other options do I have apart from refinancing?

The first obvious option would be to continue to pay the original rate as well as the same amount. Talk to your lender to see if it is possible and under which conditions.

A loan modification is another good option. With it, you can lower your term or your rate. Just make sure you understand a mortgage modification, which is not the same as a loan refinance.

One final resort would be to sell your home. Yet this can help to pay off your loan and forget about any foreclosure.

Is refinancing a fast option?

In some situations, it’s feasible to refinance right after and even during forbearance. However, you must fulfill the criteria to show that you are in excellent financial condition either before or after the forbearance for this to be possible.

To refinance, you’ll want to keep up with payments, boost your credit score, and minimize your debt.


What Are The Loan Modification Fees You Need To Know About?

A loan modification differs from refinancing your mortgage in that it entails changing the terms of your existing loan rather than replacing it with a new one.

Refinancing, on the other hand, is when you replace your loan with a new loan.

To avoid foreclosure, many people may seek to change their mortgage payment or their loan term for several reasons.

If this is your situation, you will have to contact your loan servicer and tell him about your finances to get information about how to modify loans.

Here we will discuss some mortgage relief options that your mortgage servicer may offer you and the fees you may be subject to if you decide to go for a mortgage loan modification.

What Are the Ups and Downs of Loan Modifications?

A loan modification will have a considerably milder negative influence than a foreclosure, bankruptcy, or a succession of late payments.

Benefits Of A Loan Modification

Some of the possible benefits of a loan modification from your mortgage lender on your mortgage payments are that it may (depending on the terms of your mortgage):

  • help you get current on your monthly mortgage payments if you’re behind
  • lower your monthly payments- reduce the interest rate on your loan
  • extend the term of your home loan
  • forgive a portion of your debt

Downsides Of A Loan Modification

Loan modifications, on the other hand, might have a negative influence on your credit score. An initial drop in your credit score is possible after a loan modification.

If your loan modification is only for a limited period, you’ll have to resume your original mortgage conditions and repay the amount that was deferred before obtaining a new purchase or refinancing.

Lenders may want to see a record of 3 on-time payments following permanent adjustments to assess your repayment capacity for a new loan.

If you’re currently on the monthly payments of your mortgage, it’s a good idea to look into your alternatives and see if you can apply for refinancing so you can change the terms of your loan.

Who Can Get a Loan Modification?


In general, homeowners must be behind on their mortgage payments or about to go into default to be eligible for a loan modification.

Homeowners must meet specific criteria to be eligible for a loan modification.

If you are unable to refinance or are experiencing a long-term financial hardship, if you have several months’ worth of mortgage payments outstanding or will soon fall behind, or if refinancing is not an option because of your income or other factors, a loan modification may be the best alternative.

The loss of a job, the death of a spouse, an illness that has reduced your capacity to repay your mortgage on the original terms, or a disability or calamity that has prevented you from doing so are all examples of good cause for loan modifications.

Can A Loan Modification Be Denied?

Yes, a loan servicer can deny a loan modification.

A mortgage loan is a contract, and the lender is not required to accept a loan modification and the final determination is usually in the hands of the mortgage company.

Borrowers who will never be able to repay their mortgage loan, as well as borrowers who do not respond to lender demands, are unlikely to obtain a loan modification.

Revising your mortgage contract and your current financial situation with the assistance of a professional law firm, especially if you are facing financial hardship, can save you money and help you find solutions, like loan modification programs that are perfect for you. Mortgage underwriters are usually dealing with numerous files at one time and it is important to make sure you have the right attorney on your side to ensure the mortgage company did not mess up in reviewing your file for a modification.  As this does happen, with the right attorney you can avoid a modification denial for mortgage company mishaps. 

How Long Is a Mortgage Modification?

The duration of your loan modification procedure will depend on the severity of your situation. Expect it to take anything from one to three months.

Is a Mortgage Loan Modification Permanent?

A loan modification will permanently change your home loan terms, such as the interest rate, repayment term, monthly payment, and in some cases a reduction in the principal mortgage balance.

After your loan modification has been accepted, your interest rate and loan conditions are set in stone.

If you are choosing between modification programs because you are experiencing financial hardship, it is advisable to work with your existing loan conditions with the help of an expert that can help you understand solutions.

Why Do I Have To Pay a Fee For A Loan Modification?

If you try to change the terms of your loan through a loan modification process, you may have to pay a fee.

These fees may be charged by the lender or by a professional who helps negotiate the loan modification.

A mortgage modification does not include any closing costs, but your existing lender may charge a processing fee.

If you get a mortgage modification that extends the term of your loan, you’ll pay more interest throughout the life of your loan.

Do I Have To Pay Back Loan Modifications?

There are different types of loan modifications.

Your payment amount will depend on the type of mortgage loan modification you receive.

On the backend, your loan servicer may apply a lower interest rate to the principal of your loan and you must reimburse it later.

If you get a principal deferral loan modification, your lender reduces the amount of money you have to pay each month.

Nonetheless, the amount of principal your mortgage servicer has deferred will be due when the property is sold or as time goes by and it applies to your existing mortgage.

Different Loan Modification Programs

Conventional loan modification

There are different ways to modify a loan, depending on who provides the loan. Fannie Mae, Freddie Mac, and private lenders all have their processes and criteria for modifications.

Freddie Mac and Fannie Mae offer a Flex Modification program that can help borrowers reduce their mortgage repayments by about 20%.

The interest rate, forbearing a portion of the principal balance or extending the loan’s term to make monthly payments more affordable for the homeowner are all common in a Flex Modification.

The Department of Veterans Affairs, the Department of Housing and Urban Development, and government loans are not eligible for Flex Modification programs.

FHA loan modification

The Federal Housing Administration also provides its loan modification solutions to assist struggling borrowers to make their payments more manageable.

FHA borrowers who require additional help might be eligible for the FHA-Home Affordable Modification Program (FHA-HAMP).

To qualify for a loan modification or the FHA-HAMP program, FHA borrowers must participate in a trial repayment strategy. This entails making timely payments under the new terms for three months.

VA loan modification

Veterans and military personnel who have loans guaranteed by the Department of Veterans Affairs can inquire about VA loan modifications with their servicer.

A VA loan modification can roll back missed payments and other delinquent housing expenses like unpaid property taxes and homeowners insurance.

The borrower and servicer collaborate to establish a new repayment schedule that is achievable for the veteran once these charges are added to the loan.

A Streamline Modification is available to some homeowners whose VA loans have been suspended.

The streamlined modification procedure does not need as much documentation as a VA loan modification plan, but it has two extra criteria:

  1. The combined principal and interest payment must decrease by at least 10%.
  2. To show that they can make the modified payments, the borrower must complete a 3-month trial repayment plan.

USDA loan modification

Missing mortgage payments (including principal, interest, taxes, and insurance) may be rolled back into the current loan balance under a USDA loan modification.

USDA modification plans allow you to extend the term of your loan up to 480 months, or 40 years in total, which can help you save money on interest.

Using a mortgage recovery advance, servicers may cover up to 30% of the homeowner’s unpaid principal balance.

Benefits Of Going Through A Mortgage Loan Modification With An Attorney

At Babi Legal Group, P.L.L.C., you will always meet with a competent and experienced attorney who will assess your financial and mortgage situation to determine whether you qualify for loan modification assistance and what benefits you can reasonably expect to obtain from a loan modification. 

Many homeowners try to obtain a loan modification without the assistance of an attorney, only to find their request denied for a slew of reasons. In fact, many of these applicants would have actually received a loan modification had they initially hired an attorney to help them navigate through the maze of paperwork and red tape of the mortgage companies. 

If you are behind on your mortgage payments and facing foreclosure or if you merely want to see if a loan modification can help you, don’t hesitate to contact Babi Legal Group at 248-434-4110 today for a free consultation!