Chapter 13 Bankruptcy
What Is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy allows a person to repay all or most of his or her debts through a payment plan approved by the Bankruptcy Court. The filer pays a pre-determined amount each month to the chapter 13 trustee who then distributes the money to the person’s creditors.
How Long Does Chapter 13 Bankruptcy Last?
A chapter 13 bankruptcy typically lasts three to five years and ends when the filer makes his or her last payment. After the last payment is made, the filer is no longer liable for the remainder of his or her dischargeable debt.
Who Is A Good Candidate For Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a good choice for a person who desires to repay all or some of his or her unsecured debt. The person must have sufficient income and the ability to repay his or her creditors in a reasonable amount of time.
If the filer has a significant amount of unprotected property (non-exempt), this could be lost in a chapter 7 bankruptcy. Additionally, if the filer has a large amount of protected (exempt) property that was used as security for other debts, the property could also be lost in a chapter 7 bankruptcy. In these situations, chapter 13 bankruptcy is the best choice.
Other reasons a person might be a good candidate for chapter 13 bankruptcy are if the filer has debts that would not be dischargeable under chapter 7 bankruptcy or the filer needs to protect a co-signer from creditors or collection agencies.
What Is Considered Income For Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is sometimes referred to as the “Wage Earner’s Plan.” However, chapter 13 is not limited to what is traditionally thought of as wages. A person may qualify for chapter 13 if he or she has any source of income on a regular basis.
How Is The Monthly Repayment Plan Calculated?
Calculating the monthly payment plan can be complex and includes may different factors. However, a simplified of explanation of calculating a restructuring plan for a chapter 13 bankruptcy is first, the attorney will total the filer’s monthly income from all sources. Next, the attorney will subtract the filer’s monthly living expenses such as food, clothing, utilities, insurance, etc. The amount that is left over will be divided up among the creditors.
What Happens After My Monthly Repayment Plan Has Been Calculated?
The attorney files the case and prepares a “chapter 13 plan” which is simply a debt repayment proposal. This proposal gets sent to all of the filer’s creditors and the chapter 13 trustee. The trustee and the creditors will examine the proposal and can chose to file any objections to the proposal based on several factors including but not limited to, feasibility, treatment of claims, lack of the filer’s best effort to repay, and others. After the objections are resolved, the revised proposal can be approved by the Bankruptcy Court Judge in an “Order Confirming Plan.” This plan then becomes the official chapter 13 plan and dictates the rights, responsibilities, and expectations all parties have during the bankruptcy.
Why Is Chapter 13 Bankruptcy A Good Idea?
The goal of chapter 13 bankruptcy is to let people propose a plan to reduce debt, fix a poor financial situation, and get his or her finances back on track. Chapter 13 bankruptcy allows a person to create a payment plan in which debt is repaid slowly, over time, and frequently, at a fraction of the amount of the original debt.
A Person Should Consider Chapter 13 if:
Chapter 13 Bankruptcy allows a person to repay all or most of his or her debts through a payment plan approved by the Bankruptcy Court. The filer pays a pre-determined amount each month to the chapter 13 trustee who then distributes the money to the person’s creditors.
How Long Does Chapter 13 Bankruptcy Last?
A chapter 13 bankruptcy typically lasts three to five years and ends when the filer makes his or her last payment. After the last payment is made, the filer is no longer liable for the remainder of his or her dischargeable debt.
Who Is A Good Candidate For Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a good choice for a person who desires to repay all or some of his or her unsecured debt. The person must have sufficient income and the ability to repay his or her creditors in a reasonable amount of time.
If the filer has a significant amount of unprotected property (non-exempt), this could be lost in a chapter 7 bankruptcy. Additionally, if the filer has a large amount of protected (exempt) property that was used as security for other debts, the property could also be lost in a chapter 7 bankruptcy. In these situations, chapter 13 bankruptcy is the best choice.
Other reasons a person might be a good candidate for chapter 13 bankruptcy are if the filer has debts that would not be dischargeable under chapter 7 bankruptcy or the filer needs to protect a co-signer from creditors or collection agencies.
What Is Considered Income For Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is sometimes referred to as the “Wage Earner’s Plan.” However, chapter 13 is not limited to what is traditionally thought of as wages. A person may qualify for chapter 13 if he or she has any source of income on a regular basis.
How Is The Monthly Repayment Plan Calculated?
Calculating the monthly payment plan can be complex and includes may different factors. However, a simplified of explanation of calculating a restructuring plan for a chapter 13 bankruptcy is first, the attorney will total the filer’s monthly income from all sources. Next, the attorney will subtract the filer’s monthly living expenses such as food, clothing, utilities, insurance, etc. The amount that is left over will be divided up among the creditors.
What Happens After My Monthly Repayment Plan Has Been Calculated?
The attorney files the case and prepares a “chapter 13 plan” which is simply a debt repayment proposal. This proposal gets sent to all of the filer’s creditors and the chapter 13 trustee. The trustee and the creditors will examine the proposal and can chose to file any objections to the proposal based on several factors including but not limited to, feasibility, treatment of claims, lack of the filer’s best effort to repay, and others. After the objections are resolved, the revised proposal can be approved by the Bankruptcy Court Judge in an “Order Confirming Plan.” This plan then becomes the official chapter 13 plan and dictates the rights, responsibilities, and expectations all parties have during the bankruptcy.
Why Is Chapter 13 Bankruptcy A Good Idea?
The goal of chapter 13 bankruptcy is to let people propose a plan to reduce debt, fix a poor financial situation, and get his or her finances back on track. Chapter 13 bankruptcy allows a person to create a payment plan in which debt is repaid slowly, over time, and frequently, at a fraction of the amount of the original debt.
A Person Should Consider Chapter 13 if:
- He or she is behind on their home mortgage
- He or she is behind on their car payments
- He or she had an income interruption and now needs a chance to catch up
- He or she would like to try to pay back some money to their creditors
- He or she needs to file for bankruptcy but do not qualify for a Chapter 7 case
- He or she has assets that they do not want to risk losing
- He or she has tax debts of any kind that needs help resolving and fixing permanently
- He or she has overwhelming monthly student loan payments
- He or she has large Income tax debt