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Chapter 13 Bankruptcy

May 19, 2014

If you make too much money or have too much non-exempt equity in your property you may need to file for Chapter 13 bankruptcy.  Chapter 13 bankruptcy is an alternative to Chapter 7 bankruptcy that allows an individual or married couple to keep his or property through individual debt reorganization.  A Chapter 13 bankruptcy is a great option for individuals that have been temporarily disabled, or were temporarily unemployed, and now have the means to catch up some of their past due bills.

Chapter 13 is sometimes the only viable bankruptcy alternative for those individuals who make more than the median income and therefore cannot pass the means test.

Chapter 13 bankruptcy, often called bill reorganization or a wage earner repayment plan, is available for people who have some money left over each month after their necessary living expenses. This is used to repay debts over a three- to five-year period under current law.

Chapter 13 bankruptcy also enables people to catch up on past-due house payments, child support, taxes, and other problem debts, all while under the protection of the Bankruptcy Court.  This protection, called the “automatic stay”, begins at the moment you file a bankruptcy petition, under any chapter by the way, and prevents your creditors from taking any further actions to collect debts or repossess collateral without first obtaining a court order from the Bankruptcy Court. This means that the filing of your bankruptcy petition will block a threatened foreclosure of your house, will stop an IRS wage levy, and will stop the repossession of your vehicle.

 In Chapter 13 bankruptcy, we can often reduce payments on vehicles, furniture and other secured debts, and protect co-debtors while you repay joint consumer obligations.   The filing of a Chapter 13 Bankruptcy will stop a foreclosure action.  You will be given the opportunity to pay back any missed payments over the duration of your Chapter 13 plan.  You may even be able to ‘cram down’ second and third mortgages on you property if those mortgages are entirely unsecure.  Cram downs can help eliminate negative equity in your home but the process is complicated.

Our attorneys will develop an individual Chapter 13 plan that will allow you to continue to keep your house, car, and other property while at the same time paying off a percentage of your debts over the life of the plan.  Upon the successful completion of your Chapter 13 plan the bankruptcy court will issue your discharge and all dischargeable debts will be eliminated.