What is a Chapter 13 Bankruptcy?

What is a Chapter 13 Bankruptcy -- LEE LEGAL -- DC VA MD bankruptcy lawyer

Chapter 13 bankruptcy solves a lot of problems that the other chapters of the Bankruptcy Code cannot.

What is a Chapter 13 Bankruptcy -- LEE LEGAL -- DC VA MD bankruptcy lawyer

When you get into trouble with debt and are not able to pay your bills, consider seeking bankruptcy protection. As an individual consumer, there are several different kinds of bankruptcy that you can file. These types of bankruptcy are named for the chapter in the Bankruptcy Code that contains the relevant laws. One of those types of bankruptcy is Chapter 13 bankruptcy.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is also called wage earner’s bankruptcy. This type of bankruptcy protection is one of two commonly used by consumers, along with Chapter 7 bankruptcy. However, there are some important differences between the two different bankruptcy types.

Chapter 13 bankruptcy is available to almost every consumer debtor, unlike Chapter 7. This is because Chapter 13 bankruptcy does not have a maximum income, or means test. In other words, you can generally file for a Chapter 13 bankruptcy no matter how much money you make. If you haven’t filed bankruptcy recently and don’t have millions in debt, you should be eligible to file.

The automatic stay

Once you file for Chapter 13 bankruptcy, an automatic stay goes into effect. This prevents your creditors from taking any steps to try to collect money from you. Your creditors are not even able to continue with a foreclosure or repossession after you have filed, unless they get special permission from the court to do so by filing a motion for relief from automatic stay or unless you refuse to pay after the bankruptcy ends.

The repayment plan

During the Chapter 13 bankruptcy process, you will propose to your creditors a repayment plan. This plan involves paying some portion of the debts that you owe. Your household income and type of debt you have will determine the amount that you will repay in your Chapter 13 bankruptcy. If you have secured debts, such as a car loan or a mortgage on your home, you are typically going to need to make full payments of these debts each month if you want to keep the home or car.

Chapter 13 doesn’t require you to sell any assets as part of the bankruptcy, unlike a Chapter 7. Instead, you get to keep all of your stuff but you must make payments towards the debt as part of the repayment plan. The repayment plan can last anywhere from three years to five years. And at the end of the plan, the remaining balances on eligible debt will be discharged. This means that creditors cannot try to collect any more from you on those debts.

Chapter 13 bankruptcy solves problems

Filing for a Chapter 13 is a good option for many people because it allows for debt payments to become manageable and for debt to be discharged, without requiring you to give up assets. An experienced bankruptcy attorney can help you to make the determination about whether Chapter 13 is the best option for you.

About Brian V. Lee 509 Articles
Brian V. Lee provides bankruptcy, foreclosure defense, business turnaround, and litigation services to clients in the District of Columbia, Virginia, and Maryland. Brian was the Washington, D.C. state chair of the National Association of Consumer Bankruptcy Attorneys from 2016 to 2018.