Chapter 13 bankruptcy allows you to create a 5 year payment plan to restructure your debts. During the time your payment plan is active, creditors are forbidden from contacting you, harassing you for payment, or taking any action to collect debts included in your plan.
Chapter 13 can do the following for you:
- modify (and reduce) your monthly installment payments to creditors
- reduce the total amount owed to a creditor
- reduce the interest rates you pay to certain creditors
- stop a mortgage foreclosure and force the lender to accept payment over time to repay the missed payments
- eliminate second mortgages or HELOCs (if you qualify for a lien strip)
- stop a repossession and restructure your car payments
- get your vehicle back after it has been repossessed
- stop a pending wage garnishment
- cancel lawsuit judgments filed against you and reduce underlying debt
- reduce or eliminate old tax debt
- include recent tax debt in your payment plan
Unlike voluntary payment plans, Chapter 13 plans are supervised by a bankruptcy court judge and creditors have no choice but to abide by the terms of the court approved repayment plan.
Who Qualifies for Chapter 13?
You have to have a regular source of income to qualify for Chapter 13 and your total debt must be below the Chapter 13 debt limits ($1,149,525 of secured debt and $383,175 of unsecured debt).
We also have to show that you have enough disposable income to pay your debts within 5 years. If the numbers don’t work, we would have to look at surrendering assets or looking at Chapter 7 as an alternative.
The math to calculate a Chapter 13 plan can get complex – fortunately we use a very robust computer program to run the numbers for a variety of scenarios.
Is Chapter 13 the Right Choice?
Chapter 13 makes the most sense if you have something to lose, such as a house, car or other assets. It is the only bankruptcy option if you need to stop a foreclosure or repossession, and it can eliminate a lot of stress if your budget is in the red.
Who is the Ideal Chapter 13 Client?
Chapter 13 works best for clients who have a regular income but need to restructure their debts.
- You need to reduce or restructure debt but don’t want to give up any property
- You need to stop a looming financial crisis like a foreclosure, repossession or wage garnishment
- You are earning a living but you don’t have enough disposable income to pay your debts at the current contract rate
- You earn too much, or own too much property to qualify for Chapter 7
- You have looked into bill consolidation before but need a program that requires all creditors to participate.
How Do You Find Out if Chapter 13 Makes Sense for You?
You can and should use the Internet or library to learn as much as you can about Chapter 13. If you have not already done so, take a look at the Ginsberg Law Personal Bankruptcy YouTube channel here. However, no web site can take the place of a telephone or in-person meeting with a bankruptcy lawyer.
If you sense that things are about to get worse before they get better and you want to learn more about both bankruptcy and non-bankruptcy options for dealing with debt, please reach out to us. You can fill out or “2 page” questionnaire here, or you can call us at 770-393-4985, or email us using the form on this page. We look forward to hearing from you.