July 21, 2019

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Chapter 13: A “Wage-Earner’s Plan”

Unlike a Chapter 7 Liquidation, a Chapter 13 Reorganization, or the wage-earner’s plan, involves the filing of a structured plan of repayment.  Under this repayment plan, you may pay your creditors over three to five years and pay all or part of your debts.  The length of the repayment plan is dependent on your income.

Do I need to Commit My Future Income in a Chapter 13 Bankruptcy?

Under Chapter 13, a person uses their future income to pay off creditors fully or partially over a period of time. The repayment plan must be very detailed as to your future projected income, what debts you owe, what debts you are behind on, and how much you will pay to which creditors. A consumer bankruptcy law firm can help you figure out which debts must be paid in full and which debts may be negotiated.

After filing a repayment plan, there will be a meeting of creditors. The creditors may ask questions regarding the repayment plan or your financial status and you will be required to answer the questions under oath.

Thereafter you will need to attend a hearing at the court to “confirm” your repayment plan. Once your Chapter 13 plan has been confirmed by the court, you will pay installments to the Chapter 13 trustee who will distribute the payments to your creditors according to the plan.

Upon completion of all payments under the confirmed Chapter 13 repayment plan you are generally entitled to relief from you debts.

What are the Advantages to Filing a Chapter 13 Bankruptcy?

  • You get to keep your property- Chapter 13 allows for you to stop foreclosure proceedings
  • Your debt payments may be rescheduled or lowered- Chapter 13 allows for you to pay upcoming and past-due payments over the specified period of repayment.
  • You may protect co-signers on your consumer debts- Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose.

Will Collection Agencies Be Able to Call Me While I Am Following My Chapter 13 Repayment Plan?

During the period of your Chapter 13 repayment plan creditors may not start or continue collection efforts.  Upon discharge, you will likely be released from all the debts in the repayment plan and creditors provided for in the plan are prohibited from taking action to collect the discharged debts.

What Are the Eligibility Requirements to File For a Chapter 13 Bankruptcy?

Individuals with unsecured debts and secured debts below the cut-off are eligible to file for Chapter 13 consumer bankruptcy relief. Currently this means your unsecured debts must be less than $360,475 and your secured debts must be less than $1,081,400.

Also, same as filing under any other chapter, you must receive credit counseling from an approved credit counseling agencies within 180 days prior to filing for bankruptcy to qualify for a Chapter 13 case.

Check with a consumer bankruptcy firm in your area to determine your Chapter 13 eligibility.