Understanding Chapter 13 bankruptcy
Chapter 13 is considered an adjustment of debt. It is often a good fit for people who earn regular income but need a reorganization of debt so they can repay creditors in a controlled way.
Depending on your circumstances, it may be possible to arrange a repayment plan that gives you three to five years to resolve debt. Once your case is filed, an automatic stay generally stops collection efforts while the bankruptcy is pending. At the end of the plan, some remaining unsecured debt may be discharged.
Debts Chapter 13 does not usually eliminate
Chapter 13 can be powerful, but it does not erase every kind of debt. Your attorney can help you understand which debts must still be paid and how they fit into the plan.
- Court-ordered child support or alimony
- Certain fines, penalties, restitution, or traffic-related obligations
- Many private and federal student loans
- Certain income tax debts
Benefits of Chapter 13
- Your petition can stop many collection efforts, including lawsuits, calls, and wage garnishment.
- Your assets, including your home, may be protected rather than sold off.
- You may be able to keep your home as long as current mortgage payments and plan payments are made.
- Chapter 13 may be viewed as less extreme than Chapter 7 by some creditors or future lenders.
Drawbacks to consider
- Some debts cannot be discharged.
- Chapter 13 will remain on your credit report for a number of years.
- The process requires a long-term repayment commitment.
- New mortgage payments and plan payments must be made on time.
If you do not comply with legal requirements or plan obligations, your bankruptcy case may be dismissed and creditors may be able to restart lawsuits, foreclosure, or other collection efforts.
Qualifying for Chapter 13
The primary eligibility rule for Chapter 13 is income. If you have enough disposable income to fund a plan over three to five years, you may qualify. You may also need to:
01
Be an individual
Chapter 13 is for individuals, not businesses.
02
Review taxes
You generally need to be current on state and federal tax filing requirements.
03
Confirm debt limits
Your secured and unsecured debts must fit within the applicable Chapter 13 limits.
Talk through your options
A Chapter 13 bankruptcy lawyer can help weigh the benefits and drawbacks so you can make a sound decision. If you want to know more about Chapter 13 and are ready for guidance, call Fair Fee Legal Services. We can help you navigate bankruptcy and debt relief with clear next steps.
