Chapter 13 Bankruptcy, commonly referred to as "debt repayment" or "debt restructuring" bankruptcy, is an alternative form of debt relief to Chapter 7 Bankruptcy
. People file Chapter 13 Bankruptcy cases for many reasons. Some people want to make an effort to pay what they can to their creditors but understand that they cannot afford to pay all of their debt. Other people file Chapter 13 because they cannot protect assets using Chapter 7 Bankruptcy or are not eligible to file Chapter 7 Bankruptcy because their income is too high. Still others file Chapter 13 because their circumstances have made it necessary to file multiple bankruptcy cases over a short period of time. Whatever the reason you are considering Chapter 13 Bankruptcy, there are some important things to know about this option.
First, through Chapter 13 cases, most people DO NOT pay all of their debt. Chapter 13 plans can pay anywhere between 0% and 100% of unsecured debt. Some Chapter 13 plans are set up to pay vehicle loans, mortgage arrearages, back taxes, and back child support and pay nothing to unsecured creditors such as credit card companies and medical service providers. In other cases where individuals can afford to pay these types of debts as well as a portion of their unsecured debts, Chapter 13 plans may propose to pay some percentage of the unsecured debt. Chapter 13 is a complicated form of bankruptcy so it is important to contact an attorney if you are considering Chapter 13.
Second, Chapter 13 plans can help you deal with debt that would survive a Chapter 7 case. Chapter 13 plans can be used to pay back taxes and back child support or to modify vehicle loans to pay reduced balances or interest. It can be used to catch up on mortgage payments to avoid foreclosure. Chapter 13 can also be used if you have noncriminal driving fines that are preventing you from having a driver's license.
Finally, Chapter 13 Bankruptcy cases typically take between 3 and 5 years to complete. If your income is higher than the median income of other households your size, your Chapter 13 plan will likely take 5 years to complete. If your income is lower than the median income, you may be able to complete your case in as little as 3 years but you may choose to take up to 5 years to complete your case and make lower plan payments.
Although most people prefer Chapter 7 when they find that they need to file a bankruptcy case, there are many benefits to Chapter 13 that are worth considering. We offer free 1 hour consultations to give you the opportunity to understand both the Chapter 7 and Chapter 13 bankruptcy options.