What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is commonly referred to as a “wage earner’s plan” because it enables individuals with regular income to develop a plan to repay all or part of their debts. Under this plan, debtors make monthly payments to a trustee, who then distributes the funds to creditors according to the terms of the plan. The payment plan typically lasts between 36 and 60 months, depending on the debtor’s income and the amount of debt.
Key Benefits of Chapter 13:
- Retain Your Property: Unlike Chapter 7, Chapter 13 allows you to keep your home, car, and other assets while you catch up on missed payments.
- Debt Restructuring: Chapter 13 consolidates your debts into a single monthly payment, which can make it easier to manage your finances.
- Automatic Stay: Once you file for Chapter 13, an automatic stay goes into effect, halting collection efforts, lawsuits, and foreclosures.
Chapter 13 Bankruptcy Plan Payments
One of the critical components of Chapter 13 bankruptcy is the repayment plan. The plan details how you will repay your unsecured and secured creditors based on your disposable income and the value of your non-exempt assets. Your plan must meet certain criteria, including:
- Payments Begin Promptly: Your first plan payment is due within 30 days of filing your case, even if you haven’t attended your meeting of creditors.
- Plan Duration: The length of the plan is determined by your income and can last either 36 months or 60 months, but no plan can extend beyond 60 months.
- Unsecured Creditors: You must pay unsecured creditors at least as much as they would receive if your non-exempt assets were liquidated in a Chapter 7 bankruptcy.
Failure to make timely payments can result in the dismissal of your case, so it’s crucial to follow your repayment plan carefully.
How Chapter 13 Works
- Filing the Petition and Plan:
You will file a Chapter 13 bankruptcy petition along with a repayment plan outlining how your debts will be managed. The plan will detail the treatment of secured and unsecured debts, including any liens.
- Court Approval:
The court must approve your repayment plan after ensuring it meets legal requirements. Creditors may object to the plan, but our attorneys will represent your interests to ensure a fair resolution.
- Trustee Management:
A trustee is appointed to collect your monthly payments and distribute them to creditors according to the terms of the plan. The trustee oversees the process to ensure compliance.
- Completion of Plan:
Once you’ve completed the payment plan (either 36 or 60 months), any remaining qualifying unsecured debt is discharged, and you emerge from bankruptcy with a fresh financial start.
How BCN Law Firm Can Help
Frequently Asked Questions About Chapter 7 Bankruptcy
