What is Chapter 13 Bankruptcy?

WHAT IS CHAPTER 13?

Consumers can file under Chapter 13 of the United States Bankruptcy Code.  In a Chapter 13 filing I will propose a Chapter 13 Plan to the court.  Following the bankruptcy statutes I will calculate your Current Monthly Income and your Disposable Income.  When the plan is approved by the court you will make a monthly payment to the Chapter 13 Trustee for either three or five years.  The Trustee will distribute your payments to your creditors.  At the end of the plan most of your remaining debt will be discharged.

You cannot file a Chapter 7 and must file a Chapter 13 if you make too much money.  Generally, if your household income is above the median income you must file a Chapter 13.  Also, if you have filed a Chapter 7 in the last eight years you are not eligible for a Chapter 7 and must file under Chapter 13.

Chapter 13 is a very powerful tool.  It is the preferred course if:

•You have significant tax debt.  Taxes get paid first in a Chapter 13 plan and interest and penalties stop accruing.

•You are three months or more behind on your mortgage payments.  You can pay your back mortgage debt over the life of the plan.

•You have significant non-exempt assets, such as more than $60,000 in equity in your residence, more than a couple cars, oil or gas lease interests, raw land, or ownership in a small business.

Chapter 13 is very flexible.  If your financial situation changes while you are in the plan you can convert to a Chapter 13.