Chapter 13

Central Florida Chapter 13 Bankruptcy Attorney – Mark P. Cressman

 

What is Chapter 13 Bankruptcy? 

Chapter 13 Bankruptcy is a solution for those persons who do not qualify for Chapter 7, or those who need time to pay off certain debts and have enough income to make payments through a repayment plan administered by the United States Bankruptcy Trustee.  Debtors under Chapter 13 will either make full or partial payments to their debtors through a plan administered by the bankruptcy court. The debtor must submit a plan which must be approved by the Bankruptcy Court.  Monthly payments are then made to the bankruptcy trustee who then makes payments for the debtor in accordance with the terms of the repayment plan.  The repayment plans last anywhere from 3 to 5 years. If at the end of the repayment plan the debtor has made all of their payments most unsecured debt which is left over and is dischargeable will be wiped out.

As with Chapter 7, there are several debts which, generally, cannot be discharged.  See the list under Chapter 7 Bankruptcy.

 

Who Can File Chapter 13 Bankruptcy?

It is actually easier to qualify for Chapter 13 than for Chapter 7 Bankruptcy.  Debtors do not have to pass a Means Test to qualify, but they must have a present source of income to be able to make the payments submitted as part of a 3 to 5 year re-payment plan.  If a debtor qualifies for Chapter 13, and their re-payment plan is accepted by the Bankruptcy Court, the debtor must be prepared to make their first payment within 30 days after they file for bankruptcy. Therefore it is important to make sure the re-payment plan is affordable and can be carried out by the debtor.  If it appears from the re-payment plan and the income of the debtor, the Trustee and Court may not approve the re-payment plan and the debtor must re-submit the re-payment plan until is accepted by the Bankruptcy Court.

What If I Lose My Income During the Chapter 13 Plan?

If a debtor or a spouse becomes unemployed during the 3 to 5 year re-payment plan, the debtor may petition the Bankruptcy Court to convert the case from a Chapter 13 Bankruptcy to a Chapter 7 Bankruptcy.  If the debtor does not make the payments as required by the re-payment plan, and the case is dismissed, the debtor will then owe the original amount owed to the creditor prior to filing the Chapter 13 Bankruptcy petition, less the payments made during the Chapter 13 Bankruptcy re-payment plan, plus the interest which accrued while the Chapter 13 Bankruptcy was open and pending.  Thus, if a debtor is considering Chapter 13 Bankruptcy, they need to make sure they have an adequate and steady stream of income to make the payments proposed under the Chapter 13 Bankruptcy Plan.

Debts that Remain After a Chapter 13 Discharge

A Chapter 13 discharge affects only those debts provided for by the plan. Any debts not provided for in the plan will remain, and the debtor will have to pay them in full, even after discharge. Additional exceptions to a Chapter 13 discharge include, generally, claims for spousal and child support; educational loans; drunk driving liabilities; criminal fines and restitution obligations; and certain long-term obligations, such as home mortgages, that extend beyond the term of the plan. A lawyer experienced in bankruptcy law can explain which debts are “erased” as a result of a Chapter 13 discharge and which will remain the obligation of the debtor.

 

Effects of a Salary Increase on a Wage-Earner Plan Under Chapter 13

When a Chapter 13 debtor enters into a wage-earner plan, he or she commits the next three to five years’ disposable income — that portion of the debtor’s income not required to meet the necessary needs of the debtor and his or her dependents — to the repayment of debt. Often, a debtor’s income will increase after the plan is in place, and the question arises as to what becomes of this increase in income. Bankruptcy lawyers can answer these and other Chapter 13 questions as they arise, providing information, reassurance and competent and zealous advocacy throughout the bankruptcy process.

Which One Is Better, Chapter 7 or Chapter 13?

 

This question can only be answered by the debtor.  Some debtors may have no choice and will have to file for Chapter 13 if their income is greater than the median income for the State of Florida, or if they cannot pass the Means Test in Florida.  At the same time, if the Debtor does not have a steady stream of income, the only bankruptcy option may be Chapter 7 Bankruptcy.  For those who have a choice, and do not have an extensive array of exempt assets choose to file Chapter 7 as they will obtain their discharge quicker than in a Chapter 13 Bankruptcy.

 

Chapter 7 bankruptcy is generally better for debtors who have a lot of unsecured debts, like credit card debt and medical bills. If you don't have much property, your income is low, and most of your debts are unsecured, you might want to consider Chapter 7 bankruptcy. Chapter 13 bankruptcy, on the other hand, tends to be a better option for those who have regular income and non-exempt property they'd like to keep. A local bankruptcy attorney can review your specific financial circumstances and advise you as to which type of bankruptcy protection might be best for you.

 

 

DISCLAIMER: The information contained on the pages of this website is for informational purposes only.  Nothing contained herein should be considered legal advice and no attorney-client relationship will or can exist between you and the lawyers of this firm until such time as you have signed a Bankruptcy Attorney Retainer Agreement.  You should seek competent legal counsel for advice on any legal matter.