Chapter 13: Sometimes Called “Debt Reorganization” Bankruptcy
Is It The Right Way To Debt Relief In Your Case?
Talk to an attorney to determine whether Chapter 13 bankruptcy is right for you. It may be the best debt relief option for you if:
- Your assets or income or both are too high for you to qualify for Chapter 7 (debt discharge) bankruptcy. In other words, you are above the “means test.”
- You have significant equity in your home, you can keep up with payments and you want to keep your house, but you need debt reorganization to allow for repayment of mortgage arrearage without fear of foreclosure.
- You have paid off a great deal of your car loan, can keep up with payments and want to keep the car and repay back payments over time without fear of repossession.
- You have a strong desire to pay what you can on your debts, rather than seek a sweeping discharge as in a Chapter 7 bankruptcy.
- Your debt problems include non-dischargeable obligations like back income or property taxes, student loans, back child support, or back car or mortgage payments.
How Does It Work?
Once you file a Chapter 13 bankruptcy, you will experience immediate debt relief. Filing bankruptcy puts the automatic stay in place, which has the power to stop foreclosure, stop car repossession, stop wage garnishment and stop creditor harassment.
Abe Limon will help you propose a plan that proposes monthly payments to your creditors at a rate you can afford. A bankruptcy court will need to approve the plan. Secured debts such as your mortgage or car loan take first priority. Unsecured debts such as credit card bills and medical bills are next in line. In some cases, if you qualify, you may be eligible for a discount on your unsecured debts.
Most plans last for three to five years. During this time, you will likely repay a reduced portion of your overall debt burden without pressure from creditors. All payments and disbursements will go through the bankruptcy court via a bankruptcy trustee.
At the end of the repayment period, you will receive a discharge of any remaining unsecured debt.
Debt Relief During And After The Chapter 13 Repayment Period
Both during and after a Chapter 13 bankruptcy, you can experience relief as you move toward a fresh start. It takes longer to complete than a Chapter 7 bankruptcy and it involves repaying a portion of your debts rather than having most or all of them wiped out. One major benefit is that legal fees are built into your monthly payments. This makes Chapter 13 bankruptcy very manageable for many people already struggling with financial difficulties.