CHAPTER 13
REPAYMENT PLAN
What is a Chapter 13 Bankruptcy? Chapter 13 Bankruptcies involve the repayment of debt under a plan that lasts for typically lasts for 3-5 years. Usually, the number of years is closer to 5, than it is to 3.
Who can qualify for a Chapter 13? Having a steady income or higher-net worth is helpful when considering Chapter 13, because repayment under any approved plan requires the ability to pay back the debt, which necessarily means that you have the revenue or resources to repay.
If you have no ability to repay, then a Chapter 7 may be a more suitable option.
The benefits of a Chapter 13 is that all of your bills, loans, and debts will be consolidated into a simple, easy-to-pay single payment, which the Trustee will then distribute to the creditors.
Because you will have the bankruptcy stay protection, this means that creditors will stop harassing you immediately.
During the time your bankruptcy proceeding is in progress, you can retain your assets, and even renegotiate certain loans such as your auto payments to more feasible terms.
CERTAIN TYPES OF DEBTS CANNOT BE DISCHARGED IN BANKRUPTCY, AND THOSE GENERALLY INCLUDE DEBTS SUCH AS:
Back Taxes
Child Support
Student Loans
OTHER TYPES OF DEBT DO QUALITY FOR DISCHARGE UNDER A CHAPTER 13, SUCH AS:
Personal Debt
Medical Bills
Credit Cards
UNDER THIS CHAPTER, YOU ARE ALLOWED TO KEEP YOUR ASSETS WHILE YOU PAY BACK YOUR CREDITORS UNDER THE TERMS OF THE APPROVED PLAN.
THIS IS AN ATTRACTIVE FEATURE OF THE CHAPTER 13 THAT ALLOWS YOU TO KEEP YOUR:
House
Car
Other Assets
The difficulty with a 3-5 year plan is that a number of unforeseen events can arise during that time period, which can make the repayment difficult, or even impossible. To make matters more complicated, Chapter 13 plans must be approved by the Bankruptcy court, and the success rate of doing it without an attorney is only about 2%.
If filing a Chapter 13 Bankruptcy is right for you, you should definitely use an attorney. Having an attorney does not guarantee a successful outcome, but it greatly improves your odds.
To be sure, there are downsides for filing a Chapter 13, including longer proceeding times, and higher fees. Also, when you file for bankruptcy, your credit score will be effected because the Bankruptcy filing will remain on your credit history for 7 years (less than a Chapter 7 which lasts for 10).
You may experience difficulty obtaining newly issued credit during this time. Also, if your Chapter 13 is not approved by the Court, the interest during that time will accrue, and your bankruptcy protection will be lifted. Lastly, you cannot file for a Chapter 7 if you have gone through a Chapter 13 in the last 6 years.
Therefore, it is very important that you consult us about whether Chapter 13 Bankruptcy is the right step for you.