Chapter 13 Bankruptcy

Chapter 13 Bankruptcy is also referred to as a “repayment” bankruptcy. Chapter 13 is available for debtors who are not eligible to file a Chapter 7, and a Chapter 13 may offer additional benefits which a Chapter 7 cannot.

In a Chapter 13, you would make monthly payments to the Trustee for a 3-5 year time period. The monthly payment amount is based on your household income and budget and the standards set by Bankruptcy Law.

The amount of debt you repay and for how long will depend on your household income and budget, the amount and type of debt you owe, and how much equity you have in property.

Unlike a Chapter 7, in a Chapter 13 you may keep all of your property. However, you must repay your unsecured creditors (such as credit card balances, medical bills, personal or payday loans, repossession deficiency balances, etc.) the amount that is equal to the value of your non-exempt assets.

Secured debts (such as a mortgage and car) and priority debts (such as child support, alimony, tax debt, student loans, etc.) are generally non-dischargeable in any Bankruptcy. A benefit of filing a Chapter 13 is that it provides you an opportunity to catch up on overdue payments for secured debts and better manage the repayment of any priority debts.

An additional benefit of filing a Chapter 13 is that if you are still making payments on a vehicle and you had the vehicle for at least 2.5 years, then it is possible to lower the interest rate and do a “cramdown.” In other words, a “cramdown” reduces the principal car loan down to the current market value.

America Law Group can help you determine which type of bankruptcy you may qualify for and whether it is in your best interests to file a Chapter 13 Bankruptcy depending on your individual circumstances.

For more information from the United States Bankruptcy Court website, go to the following link: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics