Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy?

While there are multiple types of bankruptcy, the most common for people with debt are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is usually filed by people who are in serious debt with limited income and who do not own property with much equity in that property (ex – own a house but owe on the mortgage close to the same amount as the value of the home.)

On the other hand, Chapter 13 bankruptcy, also known as wage earner’s debt, is for people with a regular income but are seriously behind on their debt payments. Unlike Chapter 7, you get to keep your assets and property as you repay your debts.

An experienced bankruptcy attorney will work with you throughout the filing process, making sure you gather all the necessary information and submit the correct documents.

They will also help you navigate any meetings with creditors as you set up your repayment plan.

These include:

• A complete list of your creditors and the amount owed for their claims
• A list of your sources of income and how much you make through each
• A full list of your property and any contracts or leases in your name
• A detailed list of your monthly living expenses
• Your past tax information, specifically your most recent federal and state tax returns and a statement of any unpaid taxes.

You must also propose a repayment plan that will need to be approved in court by a judge. Create the repayment plan with your attorney so you can guarantee that it will follow the requirements of the bankruptcy code.

Creditors can attend the hearing and object to your plan. They can also ask you questions about the specifics of your plan. With an attorney on your side, they can make sure your rights and interests are protected.

While the creditors can question your plan, the judge has final approval.

Drawbacks to Chapter 13 Bankruptcy

While filing for bankruptcy can seem like the only option to repay your debts, it’s important to understand the consequences and risks associated with it.

Filing for any chapter of bankruptcy immediately affects your credit score once.

With bankruptcy on your credit report, it can be difficult to get approved for a loan. It’s not impossible to receive one, but your interest rates will be higher than normal.

Luckily, bankruptcy does not stay on your credit report forever. Chapter 13, in particular, stays on your credit report for seven years.

Another thing to consider is that Chapter 13 does not get rid of your debts. You still have to pay them over a period of 3-5 years while still paying your other monthly bills and loans. However, you may not be required to pay back 100% of your debt during this time.  Depending on the circumstances, you may only be required to pay back a very small percentage of your unsecured debts (ex. credit cards, medical bills, etc…)

As your attorney, our goal is to help you feel immediate relief from the moment you contact us. In times like this, you need answers, stability, and confidence. That means giving your individual case the one-on-one attention and care it deserves.