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  • Home Practice Areas Basics of Chapter 13 Bankruptcy
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  • Basics of Chapter 13 Bankruptcy

    Chapter 13 bankruptcy is a type of bankruptcy in which you can repay some or all of your debts through a repayment plan. Filing Chapter 13 does have some requirements that are different from Chapter 7 bankruptcy.

    Qualifying for Chapter 13

    To qualify for Chapter 13 bankruptcy you must:

    • Be an individual

    Businesses and business entities cannot file for Chapter 13 bankruptcy, only a person or a married couple can file for it. However, if you are a business owner, you can file for Chapter 13 bankruptcy for your own debts or past business debts that you are personally responsible for. However, if you include your business debts, any balance left on your debt that was not paid through the Chapter 13 bankruptcy will still be the obligation of the business, but you will no longer be responsible for it.

    • Have regular income

    Having regular income does not mean you must be employed. As long as you can prove that you have any type of reliable flow of cash to make payments, you can file for Chapter 13 bankruptcy. The reason you need a regular income is because you need to make payments to the Chapter 13 trustee. You are allowed to file for Chapter 13 bankruptcy even if you do not have job as long as you prove you have a regular income. However, if you do not have reliable income, the bankruptcy courts are unlikely to approve your Chapter 13 plan.

    • Have debts within certain limits

    As of April 1, 2013 to file Chapter 13, you cannot have unsecured debts, such as credit card debts, personal loans, medical bills, and payday loans, that are more than $383,175. Also you cannot have secured debts, such as car loans and mortgage loans, that are more than $1,149,525. If you are married and filing for bankruptcy with your spouse, the amount of debt you two have combined still cannot exceed $383,175 in unsecured debts and $1,149,525. The debt limit is adjusted every 3 years for the cost of living, and the next adjustment to those limits will occur on April 1, 2016.

    Starting the Chapter 13 Process

    When you file for a Chapter 13 bankruptcy, you will propose a repayment plan to pay back your creditors to the Bankruptcy court. Whenever your plan is approved, you will make monthly payments to a bankruptcy trustee who pays your creditors for you. Your plan will detail how much each debt will get paid. When you file for bankruptcy, an Automatic Stay is placed on your case. This will prevent most creditors from taking any type of collection action against you. Creditors will not be allowed to call you, foreclose on your house, collect money from you, repossess your car, or place any type of claim on your property.

    Property During Chapter 13

    In a Chapter 13 bankruptcy, you are able to keep all your assets. If you have a mortgage or car loan that you are behind on, you can surrender your house or cars. If you do give up your house or car, you will not have to make any further payments on them. As long as you remain current on your monthly mortgage payment or car payments, you can keep your property and assets.

    The Chapter 13 Discharge

    When you finish the Chapter 13 bankruptcy process by completing all of the payments in your repayment plan, a portion of most of your debts will be paid off. Any other unsecured debts, such as credit cards, medical bills, and payday loans that were not paid off at the end of your plan will be eliminated completely. After you have been discharged and successfully finished your Chapter 13, you are free to enjoy you new sense of financial freedom.

    This is a quick look of what to expect during a Chapter 13 bankruptcy. If you have any additional questions about personal bankruptcy, browse our website for more information and feel free to contact us at 214.748.4848 anytime. We might even post your question on our website to help other people just like you.

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