Chapter 13 Bankruptcy is significantly different from a Chapter 7 Bankruptcy. A Chapter 13 is a reorganization of debt, allowing Debtors to repay all or a portion of their debts through a Chapter 13 plan while protecting property and personal assets. The concept is similar to debt consolidation, but unlike most debt consolidation programs, it permits Debtors to pay unsecured debt (i.e. a debt that is not secured by property) down without accruing interest (student loans are an exception) and without having to deal with those annoying calls from debt collectors. Under a typical plan, you make monthly payments to a court appointed bankruptcy trustee for generally three to five years. The amount of your monthly payment is determined by several factors such as the amount of debt you have, your ability to repay and the extent that you have assets. The bankruptcy trustee distributes the money to your creditors.
What Is A Chapter 13 Bankruptcy?
A chapter 13 bankruptcy can be considered personal reorganization bankruptcy. A chapter 13 allows debtors to pay back secured debts, tax debts, or non-dischargeable debt for property that they wish to keep. For example, if someone has fallen behind on their mortgage, they could file a chapter 13 to provide a way for them to keep their home. A chapter 13 gives you a restructuring of the past due amount over a long period of up to five years. Instead of trying to come up with a lump sum and save your house from a sheriff’s sale, you could enter into a chapter 13 repayment plan that’s spread out over a five-year period. In the meantime, all other unsecured personal loans, credit card debt, and medical debt would be eliminated through the chapter 13 bankruptcy, just as it would have been eliminated in chapter 7.
What Are The Requirements To Qualify For Filing The Chapter 13 Bankruptcy?
Any individual can file a chapter 13 as long as their debt does not exceed about $420,000 of unsecured debt and approximately $1.2 million of secured debt. Secured debt includes mortgages on real estate, loans on vehicles, and other collateralized loans. That individual must have a regular income source since chapter 13 is often referred to as a wage earner’s bankruptcy. Therefore, you must have a source of income to make the monthly payments and demonstrate to the court that the repayment plan is feasible. Now, you may be able to rely upon alternative or additional sources of income, such as family members’ contributions and a social security pension. That all counts. You don’t actually have to be employed and have a job to file for chapter 13. As long as you have income to support the proposed repayment plan, you can file for chapter 13.
What Types Of Debt Can Be Discharged In Chapter 13 Bankruptcy?
All the debts that are dischargeable under chapter 7 including credit cards, personal loans, medical bills, are dischargeable in chapter 13. The significant benefit of a chapter 13 over a chapter 7 is that additional debts may also be dischargeable, such as some taxes. Even debts that are not dischargeable in a chapter 13 can be provided for through the repayment plan so that they are paid over a period of up to five years. At the end of the repayment plan, you can be debt free of all of those debts that were otherwise not dischargeable, and that you didn’t have the money to pay in full before filing for chapter 13.
What Property And Assets Can I Keep After Filing For Chapter 13 Bankruptcy?
If your lawyer knows what he’s doing and a feasible plan is put in place, all of your property will remain yours at the end of a chapter 13. You’ll keep everything you want to own. Also, in a chapter 13, there is a mechanism that allows you to surrender property that you don’t want to keep. For example, a broken-down car that you still owe significant money on may be returned, a money wasting time share can be cancelled, and an unwanted property that is upside down on its mortgage can be surrendered through a chapter 13 bankruptcy. A chapter 13 can eliminate your personal liability for all those debts.
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