Chapter 13
Chapter 13 offers individuals numerous advantages that are unique to this type of bankruptcy.
This chapter of bankruptcy is for individuals (and their spouses) with regular income who would like to reorganize/repay certain debts (common examples include tax debt and mortgage arrearages) and get rid of their other unwanted debts.
This chapter of bankruptcy requires some payback of the client’s creditors, but usually is accompanied by a discharge of substantial amounts. As with all cases, our clients want to retain assets in Chapter 13. Many of those clients use this chapter to repay debts they have fallen behind on like mortgage payments or certain types of tax debt. In a reorganization case, the debtor will normally have anywhere from three to five years to repay a portion of his or her debt. Repayment in this chapter can range from 10% to 100%. Depending on what type of debt the individual has and the amount of his or her income can influence the range. What surprises our client is finding out that reorganization often results in a substantial discharge of a debt that is never repaid.
When to file Under Chapter 13
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Chapter 13 debtor’s reorganization is achieved by the proposal of a repayment plan to the bankruptcy court. Which, if successfully performed, entitles the Chapter 13 debtor to retain non-exempt assets. Allowing them to receive a discharge of any remaining debt after completion of the repayment plan.
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Chapter Thirteen is an adjustment-type bankruptcy in which the amount you owe is typically reduced according to your income, expenses, and ability to pay. In most instances, it allows you to create a 3 to 5 year repayment plan based on future earnings to pay off all or part of your debts.
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It may also allow you to renegotiate the debt and interest rate on your vehicles and other personal property. For unsecured debt, Chapter 13 can stop interest from accruing and allow you to pay back a small part of the debt, while discharging the rest.
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Most importantly, like Chapter 7, the first thing Chapter 13 Bankruptcy will do is stop the collection efforts. Creditors are prohibited from contacting you in any way to collect a debt after you have filed…..Giving you space to take a breath and get caught up!
Reasons for filing under this chapter of bankruptcy include protecting homes from foreclosure or cars from repossession. A sincere desire to repay debt or a potentially less onerous effect on the ability to obtain new credit.
Learn more about Chapter 13 Bankruptcy Law by scheduling a FREE consultation.