Chapter 13 is a form of debt repayment provided for under the Federal Bankruptcy Act. It is a Bankruptcy filing and will be reflected on your credit report for up to 10 years from the date of filing. Typically, through a Chapter 13, you will be able to keep all of your property as long as the Chapter 13 plan complies with all applicable laws.
Unlike a Chapter 7, in a Chapter 13 you use your income to pay some or all of what you owe to your creditors through an established payment plan. Each month, you will make a payment to a federally appointed Trustee who will then disburse the money to your creditors over a 3 to 5 year period. Depending on your income, it is possible that your unsecured creditors will not receive any payments over the length of the plan. However, after the payment plan is completed, the debts will be discharged and they will not be able to pursue you further.
A Chapter 13 is particularly attractive to someone who has fallen behind on their mortgage but would like to keep their home. It allows you to save your home by arranging payment of the current monthly mortgage payment and the arrearages through the plan. Additionally, if you have a second mortgage and your home is “under water” you may be able to completely eliminate the second mortgage.
There are a number of other advantages as well. You may be able to keep a car that is threatened with repossession while lowering your monthly payments and interest rate. If you pay child support or alimony and have fallen behind you can arrange to cure the arrears through a Chapter 13 Bankruptcy in order to avoid a family court hearing for contempt. If you owe back personal or business income taxes or property taxes these may also be paid through the plan to avoid a garnishment of your wages or your bank accounts.
During the course of the Chapter 13 Bankruptcy, your creditors will be unable to foreclose, repossess or sue you without Bankruptcy Court approval. Additionally, if any of your debts are co-signed, the creditor will be prohibited from taking action against the co-signer during the plan.
The amount you pay into a Chapter 13 Bankruptcy depends upon several factors – the value of the property you want to keep, your sources of income, the nature of your debts, and something called the “Means Test”. A Means Test is performed by an attorney who evaluates your income and the required payments.
Please contact me for a free consultation to discuss whether a Chapter 13 bankruptcy might be the best solution for you and your family.
Please note that these web pages are for information only. They do not constitute legal advice. These pages do not constitute, nor do they create, an attorney-client relationship between the law office of Luce, Kenney & Associates, LLC, or Brittany Cline, Esq. and any receiver.