Debt Restructuring Questions
Debt restructure is an option for those who are unable to repay their debts as stated. Restructuring of debts allows a person to keep most of their assets while helping them with repayments. It is possible to restructure a loan without reducing the loan balance. The restructure usually extends to the length of the loan to lower payments and make them more affordable. To understand more about debt restructuring, legal Experts online are in a better position to provide insightful, relevant answers and solutions.
Read below for debt restructuring questions answered by Experts.
Is this available while filing Chapter 11 bankruptcy?
Chapter 11 bankruptcy is a form of bankruptcy reorganization available to individuals, corporations, and partnerships and has no limits on the amount of debt. It allows a person to either eliminate their debt or restructure payments in order to continue running the business and repay as much debt as possible. This Chapter is the main choice of large businesses to restructure their debt and through this it is possible for most creditors to get paid. The debtor in possession is a fiduciary for the creditors. Usually, the debtor also remains in possession of their assets, operates the business under the supervision of the court for the benefit of creditors.
Is this possible with a mortgage?
Debt restructuring is possible through mortgage modification. This is where the lender allows a person to extend the term of the mortgage loan, thereby restructuring the debt.
How does Chapter 13 bankruptcy help with this?
Usually, in this Chapter, the debts are restructured under a payment plan with lower interest rates. They extend repayment terms to reduce monthly payments in order to free up month to month cash flow to afford other debts. Also, a Chapter 13 allows you to reduce rental/non-homestead property to current market values and write off the balance as unsecured debt. This allows one to reduce the debt on the rental properties and repay only what they are worth over a regular mortgage period. Essentially, Chapter 13, allows a person to pay all or a portion of the debts off. The house and car payments will typically be incorporated in the payment plan prior to which the creditor’s approval would be necessary.
Would banks such as Bank of America be inclined to negotiate the restructuring of the terms of debt?
Case Details: The person owes just under $100,000 to the bank.
Each creditor or bank have their own settlement options or understandings with their debtors and it may not be possible to speculate what a particular bank would offer. However, any settlement would be taxable income to the debtor. If the debtor defaults and fails to make payments, the bank can sue and obtain judgment. If this is successful, they can garnish wages up to 15%, freeze/seize assets such as bank accounts, investments, and so on. They can also place a judgment lien against any real estate which will need to be paid in case of refinancing or sale.
Is it possible to file for debt restructuring if a person owes a high amount of rent?
It is possible to carry out debt restructuring by offering the landlord payments over a longer period of time. If the landlord is not willing to cooperate, he/she is left with the option of suing the debtor and obtaining a judgment for the amount due. If a judgment is obtained, the landlord would have to set up a payment plan, garnish the wages or bank account. In either scenario, the landlord would have to be repaid in monthly increments. For this reason, it would be in the best interests of both parties to restructure the debt by setting up a payment plan that the debtor can afford.
Do credit card payments need to be made if the bank files for bankruptcy?
Yes, it is necessary to continue paying credit card payments as a debtor has an obligation to the credit card company irrespective of them filing bankruptcy. Filing bankruptcy mainly implies that they have requested federal assistance to restructure their debt. In the meantime, they can still remain in operation and those who owe them need to fulfill their obligation of payment.
Debt is something that most people experience at some point and at times can become an overwhelming amount which is difficult to regulate. This is when actions such as debt restructuring and bankruptcy can help. Above are some of the examples or questions people have had. This information provides a general overview but your scenario can be different which is why directing your personal questions to legal Experts online can be useful and necessary. To get answers quickly, economically, and confidentially, contact legal Experts from the comfort of your home.