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Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

Chapter 13 bankruptcy offers a different type of solution for people who are struggling financially but also:
Have non-exempt assets they want to protect, such as excess value in a home, rental property, or brokerage accounts
Need to resolve secured debt, which can’t be discharged in Chapter 7 unless the property is surrendered
Have too much income to qualify for Chapter 7 bankruptcy

How Does Chapter 13 Work?

Chapter 13 bankruptcy is built around a three to five year repayment plan. This helps the debtor by:
Allowing time to catch up past due balances without late fees, collection costs, and the threat of lawsuits or repossession
Improving the terms on certain types of debt, allowing a lower total payment
Aggregating all past-due balances into one affordable monthly payment to the bankruptcy trustee, putting an end to juggling and prioritizing
Potentially wiping out some remaining unsecured debt when the plan has been successfully completed

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Who Can File Chapter 13 Bankruptcy?

The key to a Chapter 13 bankruptcy case is to get a Chapter 13 repayment plan approved by the court. That means the Chapter 13 filer must show the court that they have sufficient income to make regular plan payments across 36 to 60 months while still paying regular living expenses.

Chapter 13 also differs from Chapter 7 in that there are debt limits. The limits change every three years, and were most recently updated on April 1, 2022. Currently, the debt limits for a Chapter 13 bankruptcy petitioner are:
• $465,275 in unsecured debt, such as credit card debt, medical bills, unpaid rent, old utility bills, payday loans, signature loans, and debt to family and friends
• $1,395,875 in secured debt, such as mortgage debt, car loans, and any other loan where assets have been pledged as collateral or the lender has a lien on property

The Chapter 13 Bankruptcy Process

Chapter 13 bankruptcy starts just like a Chapter 7 case. First, the bankruptcy petitioner must complete a credit counseling session with an approved provider. Then, the case starts with the filing of a bankruptcy petition. The credit counseling certificate must be filed with the petition. The bankruptcy petitioner will also file several schedules, which include information about income, debts, and assets. The schedules are typically filed with the petition, but in an urgent situation may be filed shortly after.

The most challenging step is creating a Chapter 13 plan that is manageable for the debtor and acceptable to the bankruptcy court. This step is complicated, as different debts are treated differently in a Chapter 13 case. Some must be paid in full by the end of the plan, while others may be partially discharged upon completion of the plan. Some may be subject to modification.

Once the proposed plan is filed, both the bankruptcy trustee and creditors get to review the plan and file objections. That may mean negotiating with creditors, or arguing for confirmation over the creditor’s objection.

Once a plan is confirmed, your responsibilities are simple: make monthly plan payments on time, tell the trustee if your income or other financial circumstances change, and keep paying your regular bills as they come due.

Chapter 13 Bankruptcy Attorneys

Crafting a Chapter 13 plan and getting it approved by the bankruptcy court can be tough–so tough that a very small percentage of people who file Chapter 13 bankruptcy without attorneys successfully complete their cases.

If you’re considering Chapter 13, it’s to your advantage to get reliable information and guidance from an experienced bankruptcy attorney right away. Your lawyer can help you determine whether Chapter 13 is the right solution for you, then navigate the complex process of building a plan, negotiating with creditors as needed, and setting you up for success.

Chapter 13 Bankruptcy FAQs

What Is Chapter 13 Bankruptcy, And How Does It Work?

A lawyer can explain that Chapter 13 bankruptcy is the type of bankruptcy allowing individuals to reorganize their debts and set up a payment plan.This type of bankruptcy is designed for people with a regular income who want to retain their assets while gradually paying off their debts over a period of three to five years. It offers a structured way to regain control of your finances, providing relief from overwhelming debt and the opportunity for a fresh financial start. Additionally, Chapter 13 can help you reduce or eliminate certain types of debts, such as unsecured debts like credit card balances or medical bills.

How Does Chapter 13 Bankruptcy Differ From Chapter 7 Bankruptcy?

Chapter 13 bankruptcy involves creating a repayment plan, while Chapter 7 bankruptcy typically involves the liquidation of assets to pay off creditors. In Chapter 13, you can keep your property and make scheduled payments, whereas Chapter 7 often requires selling assets to settle debts. Deciding between the two depends on your specific financial situation and goals, and it's essential to consult with an attorney who can guide you towards the most suitable option. Unlike Chapter 7 bankruptcy, one advantage of Chapter 13 bankruptcy is that it allows you to make up any missed payments that you may have, which is helpful for many people struggling with a large amount of debt.

Who Is Eligible For Chapter 13 Bankruptcy?

To be eligible for Chapter 13 bankruptcy, you must have a regular income and your unsecured debts must be below a certain threshold. It's crucial to consult with a bankruptcy attorney to assess your eligibility and determine if Chapter 13 is the right option for your financial situation. Your attorney will thoroughly evaluate your financial circumstances and help you understand whether you meet the necessary criteria for filing. Another key reason that many people file for Chapter 13 is that it is also beneficial for individuals who have a high income and unsecured debts, like a mortgage.

What Are The Benefits Of Filing For Chapter 13 Bankruptcy?

Filing for Chapter 13 bankruptcy provides several benefits, including the ability to stop foreclosure proceedings, prevent repossession of your assets, and consolidate your debts into a manageable payment plan. Another type of benefit that Chapter 13 bankruptcy offers for people exploring debt relief solutions is that co-signers are also protected from creditors, in addition to the allowance of paying missed mortgage payments. Chapter 13 can help improve your credit score over time as you make consistent payments and show responsible financial management. It provides a structured path to financial recovery and a fresh start.

How Can A Bankruptcy Attorney Help With Chapter 13 Bankruptcy?

A bankruptcy attorney is essential when filing for Chapter 13 bankruptcy. They can help you navigate the complex legal process, ensure that your repayment plan is fair and feasible, and represent your interests in court. An experienced attorney can increase your chances of a successful bankruptcy case. They will also provide you with expert advice on budgeting and financial planning, guiding you towards a more secure financial future. For more information about the benefits of Chapter 13 bankruptcy and who is eligible, contact a lawyer from Resolve Law Group so that you can discuss your financial situation in detail.

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FAQ's

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Do I Need A Bankruptcy Attorney?
There’s more to bankruptcy than filling out forms. Though there’s no legal requirement that you hire a bankruptcy attorney, cases filed without a lawyer are much more likely to be dismissed. That means wasted time and money, no financial relief, and possible obstacles to trying again.

An experienced bankruptcy attorney can guide you through the process from beginning to end, helping you choose the best type of bankruptcy for you, ensuring that your property is protected, preparing you for your 341 hearing and helping avoid mistakes that might put your discharge at risk.

How Much Does Bankruptcy Cost?
In 2022, the court filing fees and associated administrative costs to file a Chapter 7 bankruptcy case total $338. In some cases, there may be additional costs. For example, there is a small additional filing fee if you file an amended petition.

For Chapter 13 bankruptcy, that figure is currently $313. The Chapter 13 trustee also receives a small percentage of your monthly plan payments.

You’ll also be required to complete credit counseling before filing and a financial management course before discharge. You can usually get both courses for a package price of about $50.

How Do I Know If I Qualify For Bankruptcy?
Eligibility for bankruptcy depends on a variety of factors, including whether you are considering Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 eligibility depends in part on a means test, which is designed to make sure you really can’t afford to pay your debts. The first step is to compare your household income to your state’s median income for the same household size. If you’re below the median, you don’t have to go any further. If you’re above the median, the test gets a little more complicated.

For Chapter 13, there’s no means test. But, you must be able to demonstrate regular income sufficient to keep up plan payments while covering your ongoing expenses. And, the amount of debt that can be included in a Chapter 13 case is capped at $419,275 in unsecured debt and $1,257,850 in secure debt. (These caps will be adjusted as of April 1, 2022)

There are other variables as well, including residency, any past bankruptcy filings, and more. The best source of information about whether you qualify for bankruptcy is an experienced bankruptcy attorney.
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What Are The Different Types Of Bankruptcy?
There are several types of bankruptcy, but the most common for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves liquidating your assets to pay off as much debt as possible, with the remaining debts potentially being discharged. Chapter 13, on the other hand, is more about reorganizing your debts and creating a manageable payment plan over three to five years. The type that's right for you depends on your specific financial situation and goals.
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Will I Lose All My Assets If I File For Bankruptcy?
This is a common concern, but filing for bankruptcy doesn't always mean you'll lose everything. In Chapter 7 bankruptcy, certain assets are exempt from liquidation, meaning you can keep them. These exemptions vary by state. In Chapter 13 bankruptcy, you're more likely to keep most of your assets as you'll be repaying your debts over time. We work closely with our clients to navigate these details and protect their assets as much as possible.
Can Bankruptcy Clear All Types Of Debt?
While bankruptcy can discharge many types of debt, such as credit card debt and medical bills, not all debts are dischargeable. For example, student loans, child support, alimony, and certain tax debts are typically not cleared through bankruptcy. During our consultation, we can provide a comprehensive review of your debts and how they may be affected by bankruptcy.
How Long Does Bankruptcy Stay On My Credit Report?
The impact of bankruptcy on your credit report depends on the type of bankruptcy filed. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years, whereas a Chapter 13 bankruptcy stays on your report for up to seven years. Although bankruptcy can initially lower your credit score, many people find that their score begins to recover over time as they regain financial stability.
How Can Bankruptcy Impact My Future Credit And Loan Opportunities?
Bankruptcy can make it more challenging to obtain credit or loans shortly after filing. However, as time passes and you work towards rebuilding your credit, you can improve your ability to secure credit and loans. Many individuals find that with careful financial planning, responsible credit use, and the input of a bankruptcy lawyer, they can rebuild a strong credit profile post-bankruptcy.
Will Filing For Bankruptcy Stop Creditors From Harassing Me?
Yes, one of the immediate benefits of filing for bankruptcy is the automatic stay. This legal provision halts most collection efforts, including calls, letters, and lawsuits from creditors. The automatic stay goes into effect as soon as you file for bankruptcy and remains in place throughout the bankruptcy process. It's designed to give you breathing room while your bankruptcy case is being resolved and protect you from creditor harassment.
Can I Keep My Home And Car If I File For Bankruptcy?
Whether you can keep your home and car when filing for bankruptcy depends on several factors, including the type of bankruptcy you file and the equity in your property. In a Chapter 7 bankruptcy, if your home and car are exempt, you may be able to keep them. In a Chapter 13 bankruptcy, you're more likely to keep these assets since you're working on a repayment plan. However, you must continue to make regular payments on these assets to avoid repossession or foreclosure. Get in touch with a bankruptcy lawyer from Resolve Law Group to learn more.

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