Chapter 13 Bankruptcy
Are you having issues with repayment of your debts, including tax debt or past-due child support? Are you being threatened with wage garnishment, foreclosure on your home or repossession of your vehicle?
If you have fallen behind on a mortgage or car loan and are struggling to stay current on your bills, filing for Chapter 13 bankruptcy will allow you to restructure your debt and repay some or all of the debt over a 3-5 year period. During those 3-5 years, you will make a monthly payment to the Bankruptcy Court that encompasses payments on ALL of your debt, with the exception of your regular monthly mortgage payments, which you pay directly to your lender.
If you need legal advice to determine if you qualify for Chapter 13 or you want to learn more about what to expect during the bankruptcy process, give us a call or send us an email to speak with an experienced bankruptcy attorney, and we'll be happy to answer your questions.
What is Chapter 13 Bankruptcy and how does it work?
Unlike a Chapter 7 bankruptcy, which requires a bankruptcy trustee to liquidate your assets, if any, to repay your creditors, Chapter 13 bankruptcy involves a debt reorganization plan. Looking at the big picture, some things have to be paid - these include car loans, mortgage arrears, and certain priority debts such as tax debt and past-due child support or alimony. In a Chapter 13 bankruptcy, your debts are consolidated and you make monthly payments to the bankruptcy trustee under a Chapter 13 Plan for a period of up to three to five years, and you can keep your property and possessions. The payment amount in the Chapter 13 Plan, which should equal your disposable monthly income, is calculated by subtracting your monthly expenses from your income.
Advantages of Chapter 13:
Retain your assets – you can typically keep your property and possessions, including your primary vehicle and home. Under Chapter 13, you can stop foreclosure proceedings and cure your mortgage arrears over time.
Repay secured debts over time – allows you to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan. Doing this may potentially allow you to lower the interest and payments.
Discharge of certain debts – Some types of debt are discharged under Chapter 13 that aren’t discharged under Chapter 7, including certain taxes, property settlements, retirement loans (401k loans), and more.
Safety from creditor harassment – Chapter 13 protects you from the collection efforts of creditors including the garnishment of wages.
As soon as you file a Chapter 13 bankruptcy petition, it is not legal for creditors or debt collection agencies to contact you. This is known as the Automatic Stay. This protection will start from the moment you file a petition in the court.
Is Chapter 13 Right for Me?
Chapter 13 can provide powerful debt relief, helping you save your home and other possessions, but it’s not the right option for all individuals. If you do decide to file for bankruptcy, knowing what types of debts can be eliminated, and what to expect during and after the legal process, can help you decide if Chapter 13 is the best choice for you.
Filing a Chapter 13 allows you to repay all or a portion of your debts under the supervision and protection of the bankruptcy court. Chapter 13 bankruptcy may be the best option if you:
Have a steady source of income
Because Chapter 13 bankruptcy requires you to repay your debts each month, you’ll need a steady job and income to make these payments.
Want to keep your property and possessions
Unlike Chapter 7 bankruptcy, Chapter 13 allows you to keep your property and possessions as long as you continue making monthly payments on items you don’t own outright.
Want to discharge certain debts
More debts can be discharged under Chapter 13 bankruptcy than under Chapter 7 bankruptcy. These include unsecured debts such as credit card bills, medical bills, and some personal loans.