Truth is, Chapter 13 is very similar to Chapter 7 bankruptcy:
- it stops lawsuits, collection calls, etc.
- it discharges credit card debt, medical bills, repossessions, old taxes, etc.
Chapter 13 is like a "super Chapter 7 bankruptcy." Aside from doing all the things listed above, Chapter 13 bankruptcy also allows people the ability to do things they otherwise wouldn't be able to do in a Chapter 7 bankruptcy, such as:
- stop foreclosures
- get caught up on missed mortgage payments
- keep valuable assets (like cars and boats)
- pay off taxes, interest & penalty free, over a long period of time
- lower their car payments
Despite their differences, a lot of the same documents filed in a Chapter 7 bankruptcy are also filed in a Chapter 13 bankruptcy; however, in a Chapter 13 the debtor also files a Chapter 13 plan.
The Chapter 13 plan is a document that lays out exactly how the chapter 13 debtor intends on reorganizing his debt. A typical Chapter 13 plan will have the debtor making his regular mortgage payment and a lowered car payment through the bankruptcy court.
Please fill out this Bankruptcy Questionnaire to have a local bankruptcy attorney evaluate your case for free.
Who should file a Chapter 13 bankruptcy?
Chapter 13 bankruptcy is a less common and more complex bankruptcy than its counter part, Chapter 7. Unlike Chapter 7, which is meant to deal with a wide variety of people in a wide variety of circumstances, Chapter 13 is really meant for people who are in very specific circumstances.
Here's a short description of the different circumstances where a person would want to file Chapter 13 bankruptcy:
Perhaps the most common reason people file Chapter 13 bankruptcy is because their home is being foreclosed upon and they need to figure out a way to stop it. Chapter 13 bankruptcy stops houses from being sold at foreclosure and gives people a chance to pay back their mortgage arrears over a period of three to five years.
If you are faced with a foreclosure, have equity in your home, but can't find a lender to refinance your home, a popular strategy is to file chapter 13 rather than quickly try and sell the home. Chapter 13 will stop the foreclosure process, giving you the time you need to properly market the home and maximize your profits.
When speaking with a bankruptcy attorney about your case, be sure to mention any and all valuable assets that you own (whether or not they're in your possession). The rules under Chapter 13 let people keep things they would otherwise lose in a Chapter 7 (e.g., boats, business assets, cars, investment property, etc.). If upon evaluating your case, your bankruptcy attorney realizes that you could lose something valuable in a Chapter 7 (like your car), the next step is to consider filing a Chapter 13.
There are limits as to how much your household can make and you still be eligible for a chapter 7 bankruptcy. Exactly what those limits are depend mostly on your household size and the State that you live in. If your household makes too much money, odds are you're going to have to file a Chapter 13.
Be it because your household makes too much money, or you filed a Chapter 7 bankruptcy less than 8 years ago, or whatever reason you are not eligible for filing a Chapter 7 bankruptcy, typically you'll still be eligible for a Chapter 13.
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Note: There are a few instances where a person would not be eligible to file a Chapter 13 bankruptcy; a bankruptcy attorney would be best qualified to identify any such problems)
Please fill out this Bankruptcy Questionnaire to have a local bankruptcy attorney evaluate your Chapter 13 case for free.