What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is also known as “wage earner” bankruptcy because, in order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt. And to qualify for Chapter 13, your secured debts must be less than $922,975 and your unsecured debts less than $307,675. When you file for Chapter 13 bankruptcy you propose a repayment plan that details how you are going to pay back your debts over the next three to five years. The minimum amount you’ll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you’d filed for Chapter 7. If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over time.
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is enough to pay their reasonable expenses with some amount left over to pay off their debts.
Both Chapter 7 and Chapter 13 give you the automatic stay. In a Chapter 7 usually people don’t have enough money left over at the end of the month to pay their creditors. In a Chapter 13 they generally have money left over, not to pay the creditors the way they want to pay them but the way that they can pay them. And what happens in a Chapter 7 is the debts are usually discharged at the end, takes three months to complete a Chapter 7. A Chapter 13 takes anywhere from three years to five years, during that period of time you’re paying the excess from the monthly budget to a Chapter 13 Trustee who in turn pays your creditors. That’s the difference between Chapter 7 and Chapter 13. An attorney can help you determine, an attorney who does bankruptcies rather, can help you determine whether or not to file Chapter 7 or Chapter 13.
