Chapter 13

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A Chapter 13 bankruptcy is a reorganization of a debtor's debt with the debtor under the protection of the bankruptcy court. A Chapter 13 plan lasts between 36-60 months, and, upon successful completion of the plan, the remaining dischargeable debt is discharged. A Chapter 13 is not for everyone. In fact, a Chapter 13 is worse for your credit than a Chapter 7 (because you are in a bankruptcy for longer period); however, there are many reasons why you may have to file a Chapter 13. The main reasons to file a Chapter 13 are:

• Amount of disposable income
• To save a home from foreclosure
• The need to protect a non-exempt asset
• Previous Chapter 7 within eight years
• IRS & State tax liability
• Threat of automobile repossession
• Student loans
• Back child support

Chapter 13 gives a debtor the opportunity to reorganize their debts, pay the debts that are non-dischargeable, and protect assets all with protection from the Bankruptcy Court. For a Chapter 13 to be feasible, a debtor must have a stable and regular income, must have disposable income and the debts must not be too high.

The procedures in a Chapter 13 are the same as in a Chapter 7. The debtor meets with one of our attorneys, we file the case, the automatic stay takes effect and the debtor attends the Meeting of the Creditors. However, in a Chapter 13 the debtor begins to make payments 30 days after the filing of the case, according to the Chapter 13 plan. The payments continue until the completion of the plan. A Chapter 13 discharge comes after all the proposed payments have been made; usually between 36-60 months.

The law requires a debtor to take two financial classes. The first class, called Credit Counseling, is required before a bankruptcy petition can be filed. The class is designed to help debtors evaluate their financial situation. The second class, called Debtor Education, is required in order to receive a discharge. The class is designed to help debtors post-bankruptcy with their personal financial future.

Chapter 13 can be difficult. The limitations in Chapter 13 cases, which include tight budgeting restrictions, create a situation where the debtors are one small step from being dismissed from the Chapter 13. Furthermore, debts that are not included in the Chapter 13 or are post-petition (arise after the bankruptcy is filed) need to be kept current. However, we do not recommend Chapter 13 unless it is absolutely necessary for the debtor. We work with the debtor to put together a budget that gives the debtor the best chance for completion. Finally, during the entirety of the plan, our office is available to assist if complications arise.

After it is filed, a Chapter 13 can, in some instances, be modified to reflect a debtor's current income. In fact, a debtor may be able to convert to a Chapter 7 if his or her situation changes so that a Chapter 7 is best for the debtor.

If a debtor completes the plan, the Bankruptcy Court will issue a discharge. The debtor can begin to rebuild his or her credit after their discharge and begin to live without being under the yoke of the bankruptcy court.