Personal Bankruptcy Chapter 13
There are multiple different kinds of bankruptcy out there, all with their own rules and procedures, and they are meant to help you accomplish various goals. A Chapter 13 personal bankruptcy is all about the reorganization of your finances, rather than the elimination of debt.
The Chapter 13 bankruptcy process with a Chapter 13 bankruptcy attorney requires that you make a monthly payment to a trustee for about three to five years, depending on how much debt you have. Your trustee will then give that money to any collectors or creditors who have filed claims.
The difference between a Chapter 13 and Chapter 7 bankruptcy
A Chapter 13 bankruptcy and Chapter 7 bankruptcy are the two most common kinds of bankruptcy that impact customers. Either of these types of bankruptcy can help when you are unable to pay your bills, but there are several huge differences between Chapter 13 bankruptcy and a Chapter 7 bankruptcy.
A Chapter 13 bankruptcy enables you to keep all of your stuff and get on an affordable repayment plan to pay back your creditors. You need to have enough money in order to afford the creditors’ payments, and you also need to stay below the maximum total debt limits, which are currently about $400,000 for unsecured debts and over $1 million for secured debts.
A court will approve the Chapter 13 repayment plan, and this plan typically lasts about three to five years. Your trustee will collect all of your payments and send them to your creditors. After you finish the repayment plan, the rest of the unsecured debts are discharged.
A Chapter 7 bankruptcy can wipe out specific debts within a matter of months, but a trustee appointed by the court can sell your nonexempt property to pay back your creditors. You also need to have a low income in order to qualify for a Chapter 7 bankruptcy.
A Chapter 7 bankruptcy will typically discharge your unsecured debts, including unsecured personal loans, medical bills, and credit card debt. The bankruptcy court will discharge these debts at the end of the bankruptcy process, typically about four to six months after you begin.
There are some kinds of unsecured debts that aren’t discharged through a Chapter 7 bankruptcy, including alimony, student loans, child support, some tax debts, court fees and penalties, homeowners association fees, unsecured debts that you intentionally left off your filing, and personal injury debts you owe because of an accident while you were intoxicated. Your credit can also keep specific debts from being discharged.
Why would you file a Chapter 13 bankruptcy rather than Chapter 7?
Chapter 13 personal bankruptcy with a Chapter 13 bankruptcy attorney can actually offer you bankruptcy protection even if you were recently discharged from a previous Chapter 7 bankruptcy or if you make too much money to qualify for a Chapter 7 bankruptcy. You get the length of your Chapter 13 payment plan to pay back any of your past due debts on cars, homes, and other loans that have collateral. A Chapter 13 bankruptcy also enables you to create new terms for the payment of any car loan that is older than two and a half years old.
Furthermore, the Chapter 13 personal bankruptcy enables you to pay domestic support responsibilities like alimony and child support, as well as past-due income taxes, over the course of your three to five year payment plan. This type of bankruptcy can also protect your co-signers and decrease your high student loan payments.
The Chapter 13 personal bankruptcy also helps protect property that you might otherwise need to give up in a Chapter 7 personal bankruptcy case. You can also typically include your bankruptcy attorney’s fees in your Chapter 13 personal bankruptcy repayment plan. The Chapter 13 personal bankruptcy can be an excellent option for people who are dedicated to sticking to their repayment plan, but it is certainly crucial to know what to expect before filing this type of bankruptcy.
What is the Chapter 13 personal bankruptcy payment plan with a Chapter 13 bankruptcy attorney?
One of the biggest components of a Chapter 13 personal bankruptcy case is the repayment plan. The payments last from 36 months or three years to 60 months or five years and can include an amount that goes to past-due taxes, past-due home mortgage amounts, and unsecured creditors. The payments might also include some part of your attorney’s fees, as well as house and car payments.
The Chapter 13 payment plan is created to help substitute for the need to turn over or sell any of your nonexempt property, offer a way to pay any of your past-due alimony, child support, income tax, car, or house payments, and help you pay off unsecured debts like credit cards and medical bills in a more manageable and affordable way.
The kind and amount of debt you owe creditors and collectors, as well as your monthly income and your necessary expenses, determines what your monthly payments will be. There is some flexibility built into the budgets and payment plans to account for any unexpected expenses, but you should keep in mind that it can be difficult for even the most experienced trustees and bankruptcy attorneys to predict everything that could come up.
You likely won’t know for several months after your bankruptcy case is filed if your proposed repayment plan is approved by the Chapter 13 trustee and the bankruptcy court. The trustee will make sure that your necessary expenses listed are not too high and verify your income.
It usually takes multiple months for all of your creditors to file their claims and for the court and trustee to review the claims of the creditors and collectors. Keep in mind that if you disagree with any of the claims of your creditors or collectors, the bankruptcy judge will likely take some time to decide on the dispute. The whole process of approving the repayment plan can take multiple months to a year.
That’s why we recommend speaking to a Chapter 13 bankruptcy attorney like the Van Horn Law Group to learn more about filing a Chapter 13 personal bankruptcy.
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