What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is a repayment plan that protects the debtor from collection actions, foreclosures, and repossessions during the case and discharges any unpaid balance of dischargeable debts.  The repayment plan can last between three to five years.  Most people think that they have to repay all of their debts in a Chapter 13; however, that is rarely the case.

In Chapter 13, the debtor can impose a debt management plan on creditors, which creditors must accept.  Chapter 13 plans will stop the running of interest on credit card debt, and in some instances, lower car payments.  The bankruptcy court has the power to enforce the plan against uncooperative creditors.

Although Chapter 7 is the more common form of bankruptcy, there are several reasons why people should consider a Chapter 13 bankruptcy instead:

1. In a Chapter 13, you can remove a second mortgage from your home if the home value is less than the first mortgage.

2. You can repay tax debt without interest and penalties.

3. You can keep valuable property that would have been lost by filing Chapter 7.

4. You can pay your car off for what it is worth rather than what you owe.

5. If you’re behind on your mortgage payments or car loan, you can repay the arrears through your plan and keep the property by making the regular payments required under the contract.

6. You can file for a Chapter 13 even if you already filed a Chapter 7 within the last eight years.

To file Chapter 13, you must be an individual (no corporations or partnerships); have a regular income greater than your reasonable living expenses; and your unsecured debts need to be less than $360,475 and secured debts not exceeding $1,081,400 as of March 31, 2011.

The discharge in Chapter 13 covers many debts that cannot be discharged in Chapter 7, such as debts ordered to be paid through a divorce decree.  It is a powerful tool for debtors to regain control of their financial lives and get a meaningful fresh start.

It is important to meet with an attorney when filing a Chapter 13 bankruptcy because of its complexities and it involves a confirmation hearing held in accordance with the Federal Rules of Bankruptcy Procedures.  It is very difficult for someone to confirm a plan as a pro se filer so using an attorney will make the process simpler and easier to achieve confirmation.

For more information about Chapter 13 bankruptcy, call the experts at Heupel Law, (720) 319-8900.