In January, former UT football star quarterback Vince Young filed for bankruptcy protection. After reaching a settlement with his largest creditor, Young requested dismissal of his bankruptcy case within two weeks of the initial filing. In certain situations, similar to Young’s case, it may be beneficial to dismiss a bankruptcy prior to receiving a discharge. However, not every bankruptcy case may be dismissed voluntarily.
Vince Young filed a Chapter 11 Bankruptcy, which is typically a vehicle for businesses to reorganize their debts to make repayment more manageable. It is comparable to the more common Chapter 13 Bankruptcy for consumer debt. Vince Young likely filed a Chapter 11 because his total debt was beyond the limit allowed in a Chapter 13. To qualify for a Chapter 13 Bankruptcy, you must have unsecured debt, such as credit card and medical debt, under $383,175, or secured debt, such as a mortgage or car loan, under $1,081,400. According to his petition, Young had total debt estimated between $1,001,000 and $10 million, which is well beyond the limits of a Chapter 13.
A Chapter 13 is commonly filed by those who have fallen behind on a secured debt and need the protection of the bankruptcy court to allow them time to catch up on the past due payments. Depending on the individual’s situation, a Chapter 13 Plan allows between 36 and 60 months to repay your creditors. For the sake of this blog post, let’s assume you file a Chapter 13 because you are facing foreclosure on your house. The past due amount will be spread out over the length of the Plan and typically paid out over a maximum of 60 months. Keep in mind, when the case is filed, you will need to resume your regular monthly mortgage payments.
If during the bankruptcy, you are able to obtain a loan modification which assumes the past due payments back into the term of your loan, your Chapter 13 Plan may not have any secured creditors left to pay. Again, assuming the secured debt was your primary issue, it may be in your best interest to dismiss your bankruptcy. Unlike Chapter 7 bankruptcies, Chapter 13 bankruptcies may be voluntarily dismissed at any time during the case.
Make sure you consult your attorney before making any decisions regarding the dismissal of your case, please call the experienced attorneys at Fears | Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to fears@fnlawfirm.com.