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Chapter 13 Bankruptcy
Some people get into financial trouble through no fault of their own. A period of unemployment, a serious accident, a divorce or another event can push you to the financial breaking point. But you can recover and make a better life for yourself and your family. A Chapter 13 debt adjustment plan can help you obtain debt relief while allowing you to keep your home and personal property.
Chapter 13 bankruptcy is sometimes called a wage earner’s reorganization. It allows you to file a repayment plan with the Bankruptcy Court to pay off your past due and current debts. In Chapter 13, the debtor can force a debt repayment plan on creditors, which the creditors must accept. The court will enforce the plan against uncooperative creditors. Unlike credit management plans outside of bankruptcy, creditors don’t get to choose whether to be bound by the plan.
The Chapter 13 plan does not have to pay all debts in full. It can provide for only fractional payment to unsecured creditors, plus it stops the accrual of interest on unsecured debts like credit cards. How much the plan has to pay to creditors is a function of the confirmation tests set out in the Bankruptcy Code. The code does require that priority claims be paid in full. The most common priority claims are recent taxes and court-ordered family support.
Chapter 13 protects the debtor from collection actions during the case and discharges any unpaid balance of dischargeable debts at the end of the plan. See automatic stay. The discharge in Chapter 13 even covers some debts that cannot be discharged in Chapter 7.
An important thing about Chapter 13 bankruptcy is that it allows you to keep all of your secured property and non exempt property, provided you can make the monthly payments in the plan, which may or may not include payments for unsecured debts.
Who is eligible to file Chapter 13? Debtors opting to file a repayment plan under Chapter 7 must:
- File as an individual (no corporations or partnerships)
- Have regular income greater than your reasonable living expenses
- Have liquidated debts, unsecured debts not exceeding $336,900 and secured debts not exceeding $1,010,650
A liquidated debt is one where the amount the debtor owes is known or capable of easy calculation, like credit card debt or a loan. In contrast, the damages owing in an auto accident are usually unliquidated until the judgment is entered.
Who should consider filing Chapter 13? Debtors choose to file a repayment plan under Chapter 13 when:
- They owe debts not dischargeable under Chapter 7 (such as taxes or child support).
- They have liens that are larger than the value of the assets securing the debt.
- They are behind on house payments.
- Their assets are worth more than the available exemptions.
- Their income may trigger a substantial abuse objection.
Chapter 13 allows the debtor to:
- Keep a home and personal property.
- Stop foreclosure, repossession, garnishment and lien actions. Upon filing, the threat of foreclosure stops, as do repossessions, garnishments and judgment liens.
- Pay debts over time that cannot be discharged, like recent taxes or back child support.
- Cure defaults on secured debts. Arrearages on mortgage payments or auto payments can be rolled into your payment plan and paid off over three to five years.
- Strip a lien. A debtor can eliminate the part of a lien that is greater than the value of the asset at the beginning of the case.
- Reduce unsecured debts. Secured debts such as credit cards and medical bills can be reduced or, in some cases, eliminated entirely. Plus, a Chapter 13 stops the accrual of interest on unsecured debts like credit cards.
While you can only file Chapter 7 every eight years, you can file a Chapter 13 bankruptcy even if you got a discharge in a Chapter 7 case filed four years ago. Under the amended Bankruptcy Code, you can file a second Chapter 13 within two years of filing a previous Chapter 13.
Attorney Dallas J. Janssen understands the bankruptcy laws and how to use them to the advantage of our clients. His office will work to exempt as much of your property as possible, while eliminating as many of your debts as possible.
We encourage you to call 515-274-9161 or use our online contact form to schedule a free one-hour consultation with a lawyer who emphasizes clear communication and cost-efficient solutions. We will review your situation and recommend an effective course of action.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
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