Chapter 13 bankruptcy is a type of bankruptcy that allows individuals to repay their debts over time.
It offers a way for people who have high levels of debt to rid themselves of some or all of the debt, make monthly payments on the remaining balance, and maintain ownership in property, avoiding foreclosure.
Chapter 13 bankruptcy is often used by consumers with high amounts of unsecured debt (debt without collateral) because they don’t want to lose these items.
“Unsecured debt” refers to a type of debt in which the creditor has no collateral that they can use to force repayment. For example, a credit card company cannot seize your car or house if you default on your credit card payments.
“Secured debt” is a type of debt that is backed by an asset. For example, a mortgage on your home or car loan drawn up to finance the cost of your vehicle. These lenders can execute repossession of the collateral if you default on payments.
If you are considering filing bankruptcy, it will be important for you to contact an experienced Bankruptcy Lawyer to take on your bankruptcy case.
A chapter 13 bankruptcy allows the individual receiving chapter 13 to hold on to all of his or her assets and property. The chapter 13 debtor must develop a plan that will repay creditors over three to five years. The payments can be lower than those required in chapter 7 bankruptcy. In chapter 9 of the Bankruptcy Code, they are referred to as “Adjustment of Debts of a Person.”
The type of chapter is determined by the results from an evaluation of your financial status.
If this is your first bankruptcy filing, you may qualify for Chapter 7 bankruptcy under which you basically hand over any assets and property from before filing in order to simplify matters with creditors after everything has been settled. Chapter 7 also does not require that you repay any debts.
If chapter 13 bankruptcy has been filed previously, then chapter 13 is likely to be chosen instead of chapter 7 because it allows the debtor more flexibility in choosing a payment schedule and repayment method.
Chapter 13 Bankruptcy can help you keep your property while paying back some or all of what you owe. You can use chapter 13 to pay off your debt if you are behind on payments, if your credit cards have high interest rates and charges, or other reasons.
Here is an example.
You want to file Chapter 13 Bankruptcy because Chapter 7 bankruptcies generally require the debtor turn over his or her possessions (upon which money is owed) before getting anything back from creditors. And since chapter 7 bankruptcies are not always available to everyone, chapter 13 provides the debtor with an alternative.
Under chapter 13 bankruptcy, individuals can keep everything they have acquired after filing (except for house and vehicles) which chapter 7 does not permit.
Chapter 13 is a good way to get rid of debts that might otherwise be considered non-dischargeable in chapter 7 bankruptcy, such as student loans.
Another major difference between chapter 7 and chapter 13 is that chapter 13 requires you either repay your creditors or justify why you cannot pay them back. When choosing this option you will need to submit monthly reports on your progress until the end of the repayment plan period when a decision will be made about whether you fulfilled your obligations.
It is also possible to refinance or restructure your debts under chapter 13 bankruptcy. This chapter of the Bankruptcy Code offers individuals a chance to reduce, reorganize and repay their debt.
The chapter 13 repayment period can be from three up to five years depending on some factors such as income and outstanding amounts owed.
A chapter 13 plan must include payments each month to creditors based on what has been agreed upon in the chapter 13 proposal. You will need to make sure the chapter 13 plan covers all of your monthly expenses in order for it to be approved by a bankruptcy court judge. Otherwise, you might be denied chapter 13 status with this type of filing.
An experienced Chapter 13 bankruptcy attorney might help you determine whether chapter 13 or chapter 7 bankruptcy is better for your situation. If chapter 7 eligibility is denied you might want to file chapter 13 instead based on the type of chapter and the amount of debt you are dealing with, as well as other factors.
If chapter 13 status is approved by a judge, it will need to be confirmed at a hearing which is scheduled after filing the petition in court. You should include all of the details about why chapter 13 bankruptcy makes sense in your situation when submitting materials to the courts before this confirmation hearing takes place.
This bankruptcy is often used when individuals have debts they can’t afford to pay or need more time.
Through chapter 13, you might be able to keep property that would otherwise be lost in chapter 7 filings while paying back some of what you owe. The chapter 13 repayment plan will last three up to five years and must cover all monthly expenses for it to be approved by a bankruptcy court judge.
If chapter 7 eligibility has been denied, an experienced attorney may help determine whether chapter 13 or chapter 7 bankruptcy is better for your situation based on the type of filing and amount of debt being dealt with, among other factors which are important, before submitting materials to courts.
At Parker & DuFresne, our goal is to take the stress out of the chapter 13 process. We specialize in bankruptcy law, striving to get clients across Northeast Florida back on the road to financial stability as we bring them the resources they need for a successful case and a bright financial future.
We guide you through the complete process and use our resources to help you develop a chapter 13 repayment plan. This will allow you to successfully navigate a clear path towards debt repayment.
If you would like to learn more about chapter 13 repayment plans, contact us today!
Parker and DuFresne