CHAPTER 13 BANKRUPTCY OVERVIEW
Chapter 13 bankruptcy allows you to keep your property but requires that you pay some or all of your creditors over a three to five year period. Unlike a Chapter 7 case there is no liquidation of the debtor’s assets. Instead, creditors are paid from the debtor’s future earnings. Debtor’s propose a plan to reorganize their debts to the creditors and the trustee. The creditors and trustee review the plan and choose whether or not to object. If an objection is filed then the debtor and creditor/trustee either come to an agreement or resolve the matter in a hearing before the bankruptcy judge. Once all objections are resolved the plan is confirmed by the court, meaning it is approved. Confirmation changes the rights of the creditors as to claims for debt incurred by the debtor before filing bankruptcy. If the debtor finishes their reorganization plan by making all payments during the three to five years, the debtor will receive a discharge. A discharge shields the debtor from liability for the unpaid portions of the debts listed in the plan forever.
Who can file Chapter 13 bankruptcy?
Chapter 13 bankruptcy is for people who don’t qualify for Chapter 7 relief because they earn too much money or have had a prior discharge and for debtors who are trying to protect secured assets like houses and cars from repossession or foreclosure. There is also a maximum amount of unsecured and secured debt that a debtor is allowed to have and these amounts change every few years. Contact a bankruptcy lawyer to find out current debt limits.
What stops my creditors from harrassing me while I am in bankruptcy?
Like in Chapter 7 bankruptcy, debtors benefit from an automatic stay which prevents collection attempts outside the bankruptcy system of debts incurred prior to the case being filed. The automatic stay is a federal injunction. It carries harsh penalties for creditors who attempt to collect from debtors in bankruptcy.
How much will my plan payment be?
The plan payment in a Chapter 13 bankruptcy case depends on several factors. First, if the debtor chooses to pay an automobile claim in the reorganization plan then their plan payment will go up to provide for the claim. However, they will no longer have a separate car payment to pay. Second, the Bankruptcy Code requires that debtors pay all priority claims in the bankruptcy plan. Priority claims include income tax and past due child support. If you have these types of debts it will increase your plan payment. Finally, unsecured creditors only get paid if the debtor has disposable income available which allows them to make payments to these creditors. In most Chapter 13 cases the unsecured creditors don’t get paid anything while in other cases they get paid in full. How much is paid to unsecured creditors depends on the debtor’s income and expenses.
How long will I be in Chapter 13 bankruptcy?
It depends on how long it takes to complete your reorganization plan. Most plans are sixty months long, however some debtors are eligible for thirty-six month plans. If the debtor repays all of the claims listed in their plan early then they will complete their bankruptcy before the time provided in the plan.
For more information about filing Chapter 13 bankruptcy in Plano or McKinney, Texas, contact a north TX bankruptcy attorney.