Chapter 13 Bankruptcy Overview
A Chapter 13 Bankruptcy is often called reorganization because you repay a portion of your debt while the unpaid balance is ultimately discharged. Chapter 13 Bankruptcy is one of the more commonly used bankruptcy chapters, behind Chapter 7 Bankruptcy. Unlike a Chapter 7 Bankruptcy, a Chapter 13 Bankruptcy does not involve liquidation of the filer’s assets. The Chapter 13 Bankruptcy filer is not at risk of losing possession of their assets. Usually, a Chapter 13 Bankruptcy debtor is permitted to keep all of his property, whether it is exempt or not, as long as the Chapter 13 plan complies with the law. A Chapter 13 Bankruptcy will be more expensive than a Chapter 7 Bankruptcy in terms of attorney's fees, as the process is more complicated and drawn out.
A debtor considering bankruptcy might file a Chapter 13 Bankruptcy instead of a Chapter 7 Bankruptcy if you cannot file Chapter 7 Bankruptcy because your income is too high or if you have assets that you want to keep. You may choose to file a Chapter 13 Bankruptcy if you are behind on a mortgage payment yet want to retain the home. A Chapter 13 Bankruptcy filer may be able to save their home from foreclosure by paying your arrearages through a Chapter 13 Bankruptcy repayment plan while also making the regular monthly mortgage payment.
Chapter 13 Bankruptcy allows people in financial distress to reorganize their debt under federal court supervision. The basic principal of a Chapter 13 Bankruptcy is to provide a Chapter 13 Bankruptcy filer with a financial fresh start while at the same time allowing creditors to be paid as much as possible. Chapter 13 Bankruptcy filers file a Chapter 13 Plan with the Court. That Plan specifies the amount of the monthly payment, the total number of payments (36-60 months) and to which debts those payments are to be applied. The Plan is administered by a Chapter 13 Bankruptcy Trustee who oversees the Chapter 13 Bankruptcy case, collects the monthly plan payment and distributes the funds to creditors.
Monthly payments are made for anywhere between 36 and 60 months. At the conclusion of the Chapter 13 Bankruptcy Plan payments, the Court will enter a discharge as to all remaining unpaid debts that are otherwise dischargeable.
Many of our clients initially contact us believing they need to file a Chapter 13 Bankruptcy. After an evaluation of their situation, it is often determined that a Chapter 7 Bankruptcy is the more appropriate course of action. Please contact us to set up a free consultation to determine which bankruptcy chapter is best for you.