What is chapter 13 bankruptcy?
Chapter 13 provides benefits above and beyond a chapter 7. Chapter 13 will allow you to stop a pending foreclosure or repossession by giving you time to cure missed payments. Similarly, it will provide you with time to repay property taxes, water bills, or other liens on property you want to keep. If you do not qualify for Chapter 7 based on the amount of your income, or, if you want to keep assets such as a second home, art, jewelry, or your business, Chapter 13 can allow you to keep your valuable assets by repaying some of your debts over time.
Chapter 13 bankruptcy involves a payment plan. Your Chapter 13 plan payments will be based on what you can afford and the value of the special assets you seek to protect. You pay what you can afford to pay, while discharging what you cannot afford to pay. Chapter 13 consolidates all of your debts into one monthly payment, with creditors agreeing to accept a lesser amount and/or to accept a longer term of repayment on your debts. A Chapter 13 plan generally lasts from three and five years, depending on your circumstances.
What is the process?
After meeting with one of our experienced consumer bankruptcy attorneys for a free initial consultation, you will be asked to provide a list of documents, including a current credit report, bills, proof of income, and valuation of your assets. We will use these documents to prepare your bankruptcy petition. You will meet again with your attorney to review and sign your petition, which is then filed electronically with the Federal Bankruptcy Court. In most cases, you will begin making your Chapter 13 plan payments thirty days after your case is filed. You will attend a brief “meeting of creditors” with your attorney approximately four to six weeks after your case is filed. Repayment plans are typically approved by the Bankruptcy Court approximately one month after the initial meeting of creditors. Payments may be set up to be deducted once monthly from a bank account of your choice, or, as a deduction from your wages. A Chapter 13 plan will last from three to five years. After meeting all terms required in your case, you will receive a Chapter 13 discharge.
What are the advantages?
- • Chapter 13 provides individuals and families the opportunity to reorganize, much like a business would, while allowing you the opportunity to keep assets that matter to you.
- • For some, Chapter 13 asset protection means using five years to repay your mortgage and property tax debt to keep your home. For others, it means repaying some of your credit card debt over five years to keep important family assets like a cottage up north.
- • Whatever the case, Chapter 13 provides individual consumers with a wide range of options that can be tailored to fit your needs. Once your case is filed, interest on all debts stops accruing.
- • Creditors are entitled to repayment only if they join your case by filing a claim. Most debts are dischargeable in a Chapter 13, including credit cards, personal loans, medical bills, and even secured loans on property you wish to surrender.
- • Chapter 13 provides the unique ability for home owners to strip a second mortgage if the house is “underwater” in equity.
- • Chapter 13 also allows consumers to lengthen the repayment terms on secured car loans. While domestic support obligations are never dischargeable, property settlements rendered in connection with judgments of divorce are dischargeable only in Chapter 13.