What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy Is Designed to Stop Foreclosure & Repossession
Chapter 13 bankruptcy is a reorganization of debts. Under Chapter 13, a filer is placed on an agreed-upon repayment plan and may be able to keep all of his or her property. This may be an intriguing option if you're facing foreclosure or vehicle repossession.
With Chapter 13, debtors are given relief from temporary setbacks, illnesses, job losses or other emergencies that have caused them to fall behind on their secured debts (any debt backed by collateral such as mortgage debt) by stopping all current collection actions against them and establishing a 3-5 year repayment plan.
Read on for more Chapter 13 bankruptcy information and fill out the below free bankruptcy case review form or call 888-632-0587 to be connected with a bankruptcy lawyer in your area.
Chapter 13 Bankruptcy Characteristics & Where You May Fit In
While Chapter 7 eligibility is now determined by a means test under the new bankruptcy law of 2005, there is no such means test for Chapter 13 bankruptcy. With that said, there are certain characteristics that may make a Chapter 13 repayment plan more suitable to you, especially if you:
- maintain a regular source of income from which you can make payments (as determined in your Chapter 13 repayment plan) to your bankruptcy trustee who can then use them to pay back your creditors;
- have enough disposable income (after taking into account your necessary living expenses) to make these regular payments to your bankruptcy trustee; and
- fall within pre-set limits for secured and unsecured debts (which can be best detailed by a local Chapter 13 bankruptcy lawyer in your state).
Chapter 13 Debt Reorganization & Your Current Financial Situation
If any of the following situations describe your current financial troubles, you should learn more about Chapter 13 bankruptcy from a local Chapter 13 bankruptcy.
If you’re in danger of losing your home to foreclosure or your car to repossession as a result of your secured debts, filing bankruptcy under Chapter 13 of the U.S. Bankruptcy Code may help you stop these actions against you.
When you file Chapter 13 bankruptcy, a court order known as the automatic stay takes effects and can prevent any further collection actions against you.
In other words, Chapter 13 bankruptcy may help you stop foreclosure of your home, repossession of your car, or other collection actions against your secured items via the automatic stay. And with the Chapter 13 repayment plan, you may be able to keep these items.
You Have Tax Debts That Are Not Dischargeable in Chapter 7
You do not have the option of discharging, or eliminating, most newer tax debts under Chapter 7 bankruptcy. With that said, a Chapter 13 bankruptcy plan may allow you to include and repay these types of tax debts over time.
You Have Non-Exempt Property That You Want to Keep
As mentioned above, Chapter 7 bankruptcy is referred to as liquidation because the bankruptcy trustee has the option of liquidating (selling and converting to cash) your non-exempt assets in order to pay back your creditors. While most Chapter 7 petitioners do not have any non-exempts, if you were to file Chapter 7 bankruptcy and were going to lose an item that you did not want to lose, filing Chapter 13 bankruptcy instead may allow you to keep that item or piece of property by making payments over time.
You Want to Protect Co-Signers
Chapter 7 bankruptcy does not protect co-signers on certain debts. While you may receive a discharge in Chapter 7 bankruptcy, this discharge will not apply to the co-signer, who will still be liable for those debts. Under Chapter 13 bankruptcy, the co-signer on that debt is protected as long as that debt is included in the Chapter 13 repayment plan and you comply with the terms of your plan.
You Have Student Loan Debt
While student loan debt cannot be discharged in Chapter 7 bankruptcy, you may be able to include it in a Chapter 13 repayment plan and repay it over time.
You Have Filed Chapter 7 Bankruptcy within 8 Years
You can file Chapter 7 bankruptcy once every eight years. If you have filed Chapter 7 bankruptcy less than eight years ago and need to file for personal bankruptcy again, you can only file for Chapter 13 bankruptcy.
Chapter 7 vs. Chapter 13 Bankruptcy: What’s Better for You?
An answer to this question comparing Chapter 7 to Chapter 13 bankruptcy depends on your situation and goals, and can be examined in better detail with a local bankruptcy lawyer.
While Chapter 7 liquidation is often a good option for people swimming in credit card and other unsecured debts that they are unable to pay back, a Chapter 13 repayment plan may be suitable for you if you are looking to keep your property by catching up and making payments on these items over time.
With that said, it should be known that there are some shared situations that you will experience regardless of whether you file Chapter 7 or Chapter 13 bankruptcy, including the:
Pre-Filing Credit Counseling Briefing
As part of the new bankruptcy law, you must obtain a credit counseling briefing from a UST-certified agency prior to filing Chapter 7 or Chapter 13 bankruptcy. If you don’t satisfy this pre-filing requirement, your bankruptcy case will likely be dismissed, and the automatic stay will be lifted.
Automatic Stay: Designed to Stop Creditor Harassment
Whether you file for Chapter 7 or Chapter 13 bankruptcy, the automatic stay is provided under both consumer bankruptcy protections. In Chapter 7 bankruptcy cases, the automatic stay prevents further collection actions against your unsecured debts; in Chapter 13 bankruptcy, it halts all actions against your secured debts, including your home and car.
Post-Filing Debtor Education Course
Before you can receive your discharge after filing Chapter 7 bankruptcy or Chapter 13 bankruptcy, you must complete an approved personal financial management debtor education course on such post-bankruptcy topics as living on a budget, obtaining credit and spending money wisely.
Speak with a Chapter 13 Bankruptcy Lawyer
If your home is in danger of being lost to foreclosure or your car is in serious jeopardy of being repossessed, take action now before it’s too late. Get in touch with a nearby Chapter 13 bankruptcy lawyer who can help you examine how filing may help you stop foreclosure and keep your home.
At Bankruptcy.Me, we’ve made it especially easy for you to connect with a Chapter 13 bankruptcy lawyer. Either fill out our free bankruptcy case review form or call 888-632-0587 and we’ll connect you with a bankruptcy attorney.
And for more information on filing Chapter 13 bankruptcy, visit our sister site, Chapter13.Me.
The above synopsis of bankruptcy laws is by no means
all-inclusive and is not intended to provide legal advice. These
laws may have changed since our last update and there may be additional
laws that apply in your situation. For the latest information on these bankruptcy laws, please contact a bankruptcy lawyer in your area.