Chapter 13

If you don’t qualify for Chapter 7, all is not lost, Chapter 13 might be right for you.

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Under Chapter 13, a Bankruptcy Court can help a debtor reorganize debts and pay them off over time.

Bankruptcy under Chapter 13 of the Bankruptcy Code is sometimes referred to as a “wage earner plan.” Under Chapter 13, a debtor typically keeps all of his or her property. South Orange County Bankruptcy encourages this form of bankruptcy for those who want to retain all their valuable assets in exchange for paying a small percentage of their debt over a period of either two or five years.

A Chapter 13 Bankruptcy is a repayment and not a liquidation approach to one’s financial problems.

Individuals with financial concerns that are not treated in Chapter 7 (eg, mortgage arrears, or expensive car payments) often seek a Chapter 13 bankruptcy. Also, people who have debt that is typically not discharged (eg. back child support or back taxes) will often file a Chapter 13 case to propose a repayment plan for those obligations. Furthermore, peoplw having financial problems who nevertheless own significant assets often file a Chapter 13 case i order to preserve their property, since a Chapter 13 trustee (as opposed to a Chapter 7 trustee) does not liquidate a debtor’s assets. So what are the requirements to file a Chapter 13 bankruptcy?

A debtor begins a Chapter 13 bankruptcy by filing a petition with his local bankruptcy court. Once the petition is filed, an “automatic stay” goes into effect and the creditors are prohibited from making any attempt to collect their debt, including attempting foreclosure and repossession. Along with the petition, or shortly thereafter, the debtor files various written “schedules” and “statements” to inform the Court of his outstanding debts, his current income and expenses, any existing contracts, any current or potential lawsuits, and any recent asset transfers. Within approximately 15 days of filing the petition, the debtor submits a plan to the Court detailing how he will pay off his debts. Under the plan, the debtor must completely pay off certain “priority” debts, such as the costs of administering the bankruptcy, employees’ wages and benefits, debts for undelivered services or goods, and taxes, and pay for any encumbered property he wants to keep. The debtor can plan, based on his ability, to partially pay any remaining debt and ask the Court to discharge the rest. Once the Court approves a payment plan for the debtor, a Court-appointed Trustee begins collecting the debtor’s paychecks and administering the plan. Upon the debtor’s successful completion of the repayment plan, the Bankruptcy Court discharges any remaining debt and concludes the bankruptcy.

Eligibility to file a Chapter 13

Maximum debt load: Secured Debt must be under $1,184,200, and Unsecured Debt must be under $394,725.

In some situations, an individual may be able to use both Chapter 7 and Chapter 13 to handle his or her debt.

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