Chapter 13 Bankruptcy Basics

Chapter 13 bankruptcy is designed to give people with high levels of secured debt or valuable property get the breathing room they need to manage their debts and keep their property. Chapter 13 is a reorganization of your debt where you propose a plan to repay certain debts. Individuals who the law determines can repay some debt may not qualify for Chapter 7 bankruptcy, but they often can file under Chapter 13. Chapter 13 application is significantly more difficult than chapter 7 and having a knowledgeable and experienced attorney is important so that you know all of your options in bankruptcy. Even if you qualify for chapter 7 bankruptcy, filing under chapter 13 might makes sense. For instance, if you are behind our home, have significant tax debt, have a garnishment for past due child support, need a cheaper car payment, etc, it might make sense to file under chapter 13. Unfortunately, I have had spoken with many clients after they have received incomplete advise from other attorneys purporting to know bankruptcy law. Speak to us for free and you will know all of your options.

How Chapter 13 Bankruptcy Works

Just as in a Chapter 7 bankruptcy case, your attorney will prepare petitions and schedules that detail your income, debts and assets for the bankruptcy court. And, the court will appoint a bankruptcy trustee to oversee your case.

Then, you and your bankruptcy attorney will submit a reorganization plan. The plan will allow you to spread your past due balances over a three to five year period, while making current payments as they come due. The debt you pay back will depend heavily on your situation. Many of my clients are able to reorganize their debts, and not have to pay any money toward their unsecured debts; in many cases, much of the unsecured debt is discharged.

Your creditors and the trustee will have the opportunity to review the plan and make any objections. Once your plan is approved, you keep your property and make scheduled payments without demanding creditors vying for your dollars or outrageous late charges and other fees inflating your balance and putting you further behind.

The Bankruptcy Discharge

In many Chapter 13 cases, some unsecured debt is discharged, which means that you’re no longer legally obligated to make payment. Of course, having debt legally discharged won’t help if creditors and debt collectors continue to harass you. That’s why the court enters an injunction prohibiting creditors and collectors from attempting to collect discharged debt.

If a creditor or debt collector ignores that injunction, that company is violating a court order. When that happens, we can reopen the bankruptcy case; in some cases, the creditor will be required to pay you money damages for violating the discharge.

Our goal is not just to get you through your bankruptcy case, but to make a real difference in your life. We know that can’t happen if creditors and debt collectors are ignoring the law and continuing collection attempts. So, we offer all of our clients a free post-discharge credit report audit. When we find that a creditor or collector is jeopardizing your fresh start with illegal activity or inappropriate credit reporting, we take quick action to correct the problem and hold the creditor accountable.

Eligibility for Chapter 13 Bankruptcy

Passing the means test isn’t required for Chapter 13 bankruptcy. The primary eligibility requirements are simple:

  • You must have less than $383,175 in unsecured debt and less than $1,149,525 in secured debt (these amounts are adjusted every year); and
  • You must have regular income from which to make plan payments.

Filing Chapter 13 Bankruptcy

When you enter into a Chapter 13 bankruptcy plan, you’re making a three to five year financial commitment designed to help you catch up, protect your property and get on stronger footing for the future. It’s important that the lawyer who represents you is well versed in the intricacies of Chapter 13 bankruptcy.