CHAPTER 13 BANKRUPTCY - Under Chapter 13, the Debtor retains all of his or her assets, and the Debtor formulates a plan under which the Debtor proposes to re-pay Creditors all or a portion of the debt owed to them over a period of three (3) to five (5) years. The Debtor must make a single monthly plan payment to the bankruptcy trustee throughout the duration of the plan, and the bankruptcy trustee distributes the plan payment among all of the Debtor's Creditors in amounts and priorities specified in the plan. (Certain obligations including long-term secured liabilities may be paid outside of the plan.) The amount of the plan payment is an amount equal to all of the surplus income of the Debtor and the Debtor's spouse. Surplus income is all income received by the Debtor and his or her spouse that is not reasonably necessary for the support of the Debtor and the Debtor's dependents.
Is Chapter 13 Bankruptcy Right for You?
There are many reasons why you might want to file for bankruptcy protection under Chapter 13 instead of Chapter 7. Here a few of the most common:
* Do you feel ethically bound to pay your unsecured creditors back something ?
* Do you have too much nondischargeable debt, too much income or too many assets to file a Chapter 7 bankruptcy ?
* Do you want to keep your home but need time to make up the payments you've already missed?
* Do you owe more money on your home than it's worth (usually due to second mortgages or home equity lines of credit)?
* Do you want to keep your car, but you are behind on payments?
* Do you owe taxes that a Chapter 7 bankruptcy won't get rid of and you need time to pay the IRS back
* Do you have assets such as a second home that would most likely have to be liquidated in a Chapter 7 bankruptcy?
Many interesting and valuable options are available to Debtors in Chapter 13 cases that are not optional in Chapter 7 cases. For example, arrears owed to a secured creditor can be cured within the Chapter 13 Plan. This is particularly valuable to Debtors behind on their home mortgages. In addition, secured claims need only be fully paid to the extent of the value of the property securing the claim. Home mortgages have special rules in this regard under recent amendments.
