At a Glance
Chapter 13 is the most common type of “reorganization” bankruptcy for consumers — you repay your debts over three to five years. In order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt. If you are filing a Chapter 13 bankruptcy, a proposed repayment plan must also be submitted. After reasonable monthly expenses have been paid, how much money will you have left over to put toward your outstanding bills? And how will this money be divvied up among those you owe? Priority claims (such as taxes and back child support) must be paid in full; unsecured debts (like credit card debt and medical bills) are usually paid in part. Depending upon the judgments of those involved with your case, unsecured debts can be paid off for as little as 10 cents on the dollar. In addition to the general requirements listed above, the repayment plan must pass three tests:
Chapter 13 In Depth
Provisions of the Bankruptcy Act have made Chapter 13 filings more burdensome for filers. Under the old dispensation, Chapter 13 filers enjoyed more protection against legal actions by litigants intending to recover funds or to impose new costs. Filers were protected against evictions; under the Act they no longer are. They may lose their driver’s licenses. They must continue to respond to divorce and child-support actions. The Act has also moved family members with financial claims (e.g., for child support, alimony) to the first rank of recipients, ahead of secured creditors. Like Chapter 7 filers, Chapter 13 filers are also required to participate in mandatory financial management education.
Debts that remain after a Chapter 13 Discharge
WHEN TO USE CHAPTER 13?
Reasons to use Chapter 13 instead of Chapter 7
Many debtors choose not to file for Chapter 13 because it requires repayment of at least a portion of their debts (unlike Chapter 7, which wipes out many debts entirely). In some situations, however, Chapter 13 is the better bankruptcy option. And certain debtors don’t get to choose: Not everyone is eligible for Chapter 7.
The Law Offices of Alex Leon will explain all available options so you can make the best informed decision for you and your family.
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