Chapter 13 Bankruptcy

When you’re in the midst of a financial crisis, you might feel confused and hopeless. Even when you are unable to meet your obligations, there may be hope for regaining economic stability. If you wish to hold onto some assets, like your home and car, or you make over a certain income threshold, then Chapter 13 bankruptcy might be the best option.

Not everyone qualifies for bankruptcy or understands how to navigate this complex process. This is why consulting with a knowledgeable legal advocate can help. At Gulf Coast Bankruptcy Attorney, we have years of experience helping clients gain financial freedom and peace of mind. If you are considering Chapter 13 bankruptcy or are unsure which direction to take, contact our office today for a free consultation.

What is Chapter 13 Bankruptcy?

Unlike Chapter 7 bankruptcy, which requires you to liquidate most of your assets in exchange for the elimination of your debt, Chapter 13 bankruptcy focuses on reorganizing your finances and preserving your assets.

Specifically, this process requires that the debtor (you) make monthly payments to a trustee for a period of 36 to 60 months. The trustee then distributes that money to creditors who have made valid claims. Once the agreed period is complete, your debts will be wiped clean, and the bankruptcy case will be closed.

Eligibility for Chapter 13 Bankruptcy

Chapter 13 bankruptcy isn’t appropriate for everyone. If you are considering this type of bankruptcy, here are some of the requirements:

• Individuals only– Chapter 13 bankruptcy isn’t available to businesses. However, if you have business-related debts that you are personally responsible for, they can be included in your repayment plan.
• Steady income– You must be able to demonstrate to the court that you have enough income to satisfy your regular household obligations as well as your repayment plan.
• Debt limits– Secured and unsecured debts cannot exceed certain amounts for Chapter 13 bankruptcy (these limits adjust every three years). If your total debts are too high, you may have to file for Chapter 11 instead.

If you have questions about the requirements or would like to discuss which type of bankruptcy would be most appropriate for your situation, we’d be happy to outline your options during an initial consultation.

Benefits of Chapter 13 Bankruptcy

If you are weighing your options, here are a few of the benefits to filing Chapter 13 bankruptcy:

• Stops creditor harassment– Similar to other types of bankruptcy, you will receive an automatic stay with Chapter 13, which prevents creditors from trying to collect on their accounts. This includes garnishing your wages, repossessing property, or foreclosing on a home.
• Keep property you’d otherwise lose – In a Chapter 7 bankruptcy, you may be forced to liquidate many of your assets to pay off creditors. Chapter 13 allows you to hold onto your property because you will still repay your debts.
• Better than an IRS repayment plan– If you owe money to the IRS, you’ll have to pay it in full with a Chapter 13 bankruptcy. But the repayment figure is frozen once you file, and there are no additional penalties, accrued interest, or late fees. Also, you only need to pay the amount you owe, and any existing penalties can be discharged in your bankruptcy.
• Protect a codebtor on a personal debt– If you file a Chapter 7 bankruptcy, your codebtor will still be on the hook for the debt. But creditors will leave them alone if you file Chapter 13 as long as you maintain your agreed payments.
• Eligibility for bankruptcy – Some people aren’t eligible for Chapter 7 bankruptcy because their income is too high or they don’t meet other requirements. If you can’t file for Chapter 7 bankruptcy, you can still get financial relief through Chapter 13.

The Chapter 13 Bankruptcy Process

Once you and your attorney have confirmed your eligibility for Chapter 13 bankruptcy, you’ll need to schedule mandatory credit counseling as the first step in the process. Your attorney can then gather the necessary documentation and file a petition with the court, which automatically stops your creditors from pursuing further debt collection.

Part of your Chapter 13 filing is your “Plan” for repayment to your creditors over a period of 36 to 60 months. About one month after your case is filed, there will be a mandatory meeting with your trustee, called a “341(a) Meeting,” in which creditors can object to the Plan.

Creditors have 90 days following the meeting to file a proof of claim with the bankruptcy court. The court will then hold a hearing to confirm your plan or make any necessary amendments. You will begin making regular monthly payments 30 days after your bankruptcy case is filed, and those will continue for the duration of your plan. You must also take a financial management course before your case is discharged.

Once you have completed all the requirements of your plan, the court will sign the final order, and the remainder of your unsecured debts will be discharged.

Dischargeable Debts Under Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to restructure your debts through a repayment plan and catch up on missed mortgage or car loan payments. At the end of your plan, you will receive a Chapter 13 discharge that eliminates most of your remaining debts.

Some debts, called priority debts, must be paid in full through bankruptcy. These include items such as child support, alimony, and certain tax debts. If you want to keep your house and car, you must also pay off any arrears through the repayment plan and continue to make regular on-time payments.

But nonpriority unsecured debts will be wiped clean at the end of your Chapter 13 bankruptcy. Some of the types of debts that can be discharged include:

• Credit card debt
• Medical bills
• Utility bills
• Personal loans
• Most lawsuit judgments
• Some nonpriority income tax obligations

In some cases, you can eliminate debts that are not dischargeable in Chapter 7 bankruptcy. Some examples include:

• Retirement account loans
• Association fees due after your filing date
• Debts related to malicious or willful damage to property

It may also be possible to remove a lien from your home that is attached by a second mortgage during the Chapter 13 bankruptcy process.

Speak With a Qualified Gulf Coast Chapter 13 Bankruptcy Attorney

Taking on your financial difficulties alone can be frustrating. Unless you understand the complexities of federal and state bankruptcy laws, we recommend you seek the counsel of an experienced bankruptcy attorney.

At Gulf Coast Bankruptcy Attorney, we are dedicated to helping our clients find a solution to their debt problems. Contact us today and we will tell you more about your options.