Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, you attempt to repay your creditors some or all of the money you owe them over a period of roughly three to five years.

Chapter 13 bankruptcy is used primarily by people who are attempting to save their home from foreclosure.  Filing Chapter 13 bankruptcy can also be used to save a car that has been repossessed or is about to be repossessed.

Chapter 13 bankruptcy is also used by people who have enough income that they should reasonably be expected to repay at least part of their debt to the bankruptcy court.  In addition, people who have assets valued at more than what can be protected by filing a chapter 7 bankruptcy, and who therefore would stand to lose those assets, may also elect to file a chapter 13.

Chapter 13 is a consumer debt reorganization. This allows debtors to restructure payments by combining many debts into their “plan” and paying one monthly payment to the Chapter 13 Trustee for all the debts included in the plan. Regular mortgage payments continue to be made directly to the creditor “outside” the plan. Thus, if you have mortgage arrears, the arrears can be included in the plan, but the future payments due under the loan must ALSO be made separately. The debtor keeps his property and makes payments to the trustee out of future income to pay all or a portion of his debt over the life of the plan. Many factors go into determining if a debtor qualifies for or should pursue a Chapter 13 filing. You should consult an attorney before deciding if this avenue is right for you.

In Chapter 13, even though a debtor keeps his property , property exemptions are still used to determine if a “plan” complies with the bankruptcy Code. Creditors are entitled to receive at least as much through the Chapter 13 plan as they would have under a Chapter 7 liquidation. Hence, a debtor’s payments into a Chapter 13 plan must provide at least as much to creditors as they would have received through liquidation in Chapter 7 of non-exempt property.

Chapter 13 bankruptcies are very complicated bankruptcies.  If you think that a chapter 13 bankruptcy would be a benefit to you, call us to schedule a personal meeting.  We will go over it in detail exactly what is involved in a chapter 13, how the bankruptcy petition is prepared, and what the ramifications would be for you.

The Link below is a Microsoft Word Document, that will help to give you some general information about what happens in a Bankruptcy case.

Bankruptcy 7&13