A Quick Tip for Qualifying a Chapter 13

I just got off the phone with an attorney in Florida regarding a case he was working on.  Believe it or not, these debtors actually had equity in their home (which is rare to find in this day and age.)  Their home was appraised at $400,000 and they owed $387,000.

Originally the attorney filed a Chapter 13 and tried to strip the second mortgage but the mortgage company filed a Motion for Relief from Stay based on the fact there was equity in the home.  The attorney then converted the case to a Chapter 7 and wanted my help to convert it back to a Chapter 13.

Since this can be a common problem, here is a quick tip I learned from one of the attorneys I worked for handling this issue:

1.  Take the total amount of arrearages owed on the home.  In the case discussed above, this amount was $115,000 (which included attorney fees, foreclosure proceeding fees and non-payment dues covering 24 months.)

2.  Divide the arrearage amount by 60; which is the maximum time a debtor can be in a Chapter 13.  In the case discussed above, this amount was $1,916 per month.

This simple calculation told the attorney that the debtors did NOT have enough disposable income to pay the arrearages; let alone the second mortgage payment itself.  And this saved the attorney in Florida a great deal of time.  Instead of filing a motion to convert the Chapter 7 back to a Chapter 13, the attorney was able to determine immediately that a Chapter 13 would not be possible.

This left the debtors with only two choices: (1) Surrender the home, or (2) Increase their income.

I hope this quick tip helps save you time and money when you encounter the same problem.  If you have any cases you would like for me to help you with, please contact me directly at:

Victoria Ring
Cell: 719-659-0743
Email: victoriaring1958@gmail.com


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