Chapter 13 Bankruptcy
Chapter 13 is sometimes referred to as a reorganization or debt consolidation bankruptcy. It is generally designed for filers who have a regular source of income and the ability to pay all, or a portion, of their debts over time. Chapter 13 is also an option for filers who earn too much income to qualify for a Chapter 7, own valuable property that is not exempt, or want to stop a home foreclosure or vehicle repossession. Some of the advantages it offers are the ability to catch up on missed payments for certain debts, as well as the possibility of discharging the balance on some unsecured debts that were not eliminated through repayment.
The procedure for filing a Chapter 13 is somewhat similar to that of a Chapter 7 except that it includes a proposed Plan for debt payments. A Chapter 13 plan can be structured in various ways, but a typical formula will provide for payment of secured debts (i.e. mortgages, car loans), past due arrearages, and a percentage of the balance owed on unsecured debts (i.e. credit cards, medical bills). In many cases, unsecured creditors are paid only a percentage of what is owed with the remainder being discharged after successful completion of the Plan. And in some situations, it may be possible to propose a Plan that pays nothing to unsecured creditors which would result in 100% of that debt being wiped out. The length of the Plan can vary between three to five years and is based on factors such as income, assets, and amount of debt.
A Chapter 13 discharge is also somewhat broader than what is available in a Chapter 7 and may allow for the modification of certain debts that are otherwise unavailable. Some of the options that may be available under Chapter 13, but not Chapter 7, include discharging debts arising from property settlements in divorce proceedings, and stripping unsecured second mortgages from residential real estate. However, to receive a discharge it is necessary to successfully complete the Plan. In general terms, this requires proposing a Plan with feasible payments, and then making all of those payments to the Trustee assigned to the case. If a Chapter 13 is dismissed before completion, then all the debts the Plan serviced will snap back into place as if no bankruptcy had ever been filed. Careful planning and preparation before filing is key to a successful Chapter 13.
The Law Office of Jonathan T. Mitchell, PLLC assists client’s through all stages of the Chapter 13 process from pre-filing asset analyses to final discharge. My firm’s focus on providing personal service is aimed at eliminating some of the confusion and complexity that filing bankruptcy may involve. Chapter 13 Plans can be particularly complex, and may require amendments and modifications as circumstances change during the three to five years before discharge. And filing an incorrect petition can have devastating affects on your property rights. Having a qualified attorney on your side make a difference in terms of achieving a successful Chapter 13. Contact my office today for a free consultation to discuss your options and how my firm can help you through the process.