Chapter 13

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is another common type of bankruptcy filing. It is sometimes called the Wage Earner’s Bankruptcy, and it is commonly used by individuals with regular income since under this filing a repayment plan is established.

What is a Repayment Plan?

A repayment plan is a proposal to repay debts on a certain timeline in order to prevent repossession or foreclosure. The repayment plan is subject to review by a Trustee. Once a plan is established, the debtor will make monthly payments directly to the Trustee over the course of 36 to 60 months. Once the clock has run out on the repayment plan, the debtor is relieved of their remaining debt for good. This does not mean that minimal payments can be made. Under Chapter 13 bankruptcy, all of the debtor’s disposable income must go towards debt reduction.

Am I Eligible for a Chapter 13 Bankruptcy?

In order to file for Chapter 13 bankruptcy, you must be able to demonstrate that you have income and therefore the means to pay down your debts. Income can come from a salary, a pension, social security, unemployment, and a variety of other sources, but the source of the income must be disclosed. You also must be current on your tax filings in order to file for this type of bankruptcy.

The Pros of Chapter 13 Bankruptcy:

  • The establishment of a repayment plan helps to prevent foreclosure and repossession of your home and belongings.
  • It effectively reduces the amount of debt you are expected to pay back.
  • It protects anyone you may have co-signed a loan with against debt collectors.

The Cons of Chapter 13 Bankruptcy:

  • Legal fees are generally higher than they would be for a Chapter 7 filing.
  • Your repayment plan can stretch out for years and failure to pay will bring your case back to court.
  • The bankruptcy will remain on your credit report for seven years.

How Our Law Firm Can Help You:

We can help you to determine which type of filing is best for your given circumstances, and we can guide you through the filing process.