Chapter 13 Bankruptcy Allows You To Repay All Or Part Of Your Debt Monthly Over Time

Struggling with a mountain of debt you can’t afford to repay according to your creditor’s demands?

It’s extremely stressful. Can creditors take your car or house? Will they sue you? Will they ever stop calling and sending you letters?

You may qualify for Chapter 13 Bankruptcy, which allows you to make monthly payments over time, usually three to five years, to repay all or a portion of your debt, based on your income. A Chapter 13 business bankruptcy attorney can do the following:

• Stop foreclosure
• Help you catch up on overdue mortgage payments
• Stop repossession
• Cease bill collection actions
• End lawsuits and wage garnishing

Filing any chapter of bankruptcy results in a “stay,” which stops the foreclosure process. However, chapter 7 allows mortgage holders to request the stay be lifted, which they often do. It also doesn’t allow you to catch up on mortgage payments, or avoid repossession. Chapter 13 lets you make up your past-due mortgage payments if you remain current on your present payments. You can do the same to keep your car and avoid repossession.

Do You Qualify For Chapter 13 Bankruptcy?

You may or may not qualify for Chapter 13 Bankruptcy, depending on your current income. Our firm determines your ability to repay your debt using a “Means Test.”

The structure of the Means Test is governed by law. If your income is low enough, you may qualify for Chapter 7 Bankruptcy, which removes your responsibility to repay most of your debt. However, if your income is higher, you may qualify instead for Chapter 13.

In either case, we will guide you through each step of the process.

How Does Chapter 13 Bankruptcy Work?

Chapter 13 is also called a “wage earner’s plan.” It enables individuals or married couples with regular income to develop a plan to repay all or part of their debts. A corporation or partnership cannot file Chapter 13. Under this chapter, you propose a repayment plan to make monthly payments to creditors over three to five years. During the plan time period, a creditor cannot continue collection efforts.

You will file schedules that list your property, assets, liabilities, income, and expenses. An individual or married couple, even if self-employed, may be eligible for Chapter 13 relief.

However, your unsecured debts (credit card bills, medical debt) must be under $394,725 and your secured debts must be less than $1,184,200. These amounts are adjusted periodically, according to changes in the Consumer Price Index.

Filing bankruptcy automatically stops most collection actions. You’re required to file a repayment plan within 14 days of filing the bankruptcy.

How Does The Repayment Process Work?

In Chapter 13, there are three different types of claims:

1. Priority: Granted special status by law (taxes and domestic support payments)
2. Secured: Gives creditors the right to take the property back if you can’t make the legally obligated payments
3. Unsecured: The creditor has no special rights to collect on these types of debt (payday loans, credit cards, medical bills, and others)

If the court “confirms” your plan to repay, it binds the debtor and each creditor. It is up to you to make the plan work by paying the trustee on time as agreed. The trustee then distributes your payments among your various creditors. But, you don’t have any direct contact with your creditors during the repayment process.