It’s not unheard of for higher-income folks to avail themselves of the bankruptcy system. For certain, people who make over $100,000 per year will not be able to discharge their debts in Chapter 7. Also, they will certainly be unable to discharge any leftover unsecured debts after a 60-month Chapter 13 repayment plan, but they file in that chapter anyway. Why would someone who can afford to pay off all their debts out of their current income file Chapter 13 Las Vegas bankruptcy under what’s known as a “100% repayment plan”? There are four reasons.
(1) Even though all the creditors are repaid in full and no debt is discharged after the plan concludes, 100% repayment plans can still save debtors very large sums of money over the course of the plans. In particular, they avoid accrued interest, penalties, and late fees that they would otherwise have to pay. The savings from paying accrued interest at annual rates of 15 percent or greater more than make up for the cost of filing bankruptcy.
(2) Chapter 13 allows debtors to strip off underwater second mortgages on their houses. In many cases, homeowners prefer to file “Chapter 20,” which is a joke that comes from the fact that people can file in Chapter 7 to discharge the underwater second mortgage and then Chapter 13 to strip the lien (7+13=20). For those who can’t qualify for Chapter 7 because they make too much money, they must repay the mortgage and have the lien stripped in Chapter 13 only. Again, the benefit is that the debtor doesn’t have to worry about interest and penalty fees.
(3) 100% repayment plans are also much more likely to be confirmed by the bankruptcy court because it ensures the creditors’ best interests.
(4) Finally, if the amount of debt is low enough, the 36-month minimum duration requirement doesn’t apply.
The important point from 100% Chapter 13 repayment plans is that they provide benefits to debtors even if they have high incomes, or they want to erase a lot of debt without becoming involved in a debt settlement scheme.
For more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.