Although we usually recommend bankruptcy under Chapter 7 for people who can meet the eligibility requirements, Chapter 13 can also provide immediate relief from creditor pressure while paying back a portion of their debts. In some situations, filing Chapter 13 bankruptcy may still be a better choice than Chapter 7 bankruptcy, even for people who qualify for Chapter 7.
To learn more about your bankruptcy options and to compare Chapter 13 and Chapter 7 bankruptcy, discuss your situation with a knowledgeable bankruptcy attorney. Contact Law Offices of Daniel G. Shay in San Diego for a free initial consultation.
The distinctive feature of Chapter 13 bankruptcy is the debt reorganization component. A Chapter 7 bankruptcy eliminates all eligible debt within four to six months of filing your petition. In Chapter 13, on the other hand, you get your discharge after you’ve paid part of your debts under a monthly payment plan that lasts three to five years.
Most people seek Chapter 13 relief because they can’t satisfy the means test necessary to file a Chapter 7 case. In some situations, however, you may choose to file Chapter 13 for other reasons. A good example is if you want to keep assets that you might be required to surrender under Chapter 7. In your Chapter 13 bankruptcy petition, we include the value of those assets in your Chapter 13 plan payments.
Chapter 13 is also useful for paying off past-due arrearages on mortgage or car payments. Taxes and student loans are usually not dischargeable in bankruptcy. However, if you owe back taxes or a student loan, bankruptcy under Chapter 13 will stop lawsuits, levies and garnishments and help you regain some control over the amount of monthly payments. The Chapter 13 debt repayment plan is intended to serve as the exclusive means of paying down your indebtedness; as long as you perform on the plan your creditors will not be able to take legal action against you.
It’s up to the debtor to propose the amount of the monthly payment under a Chapter 13 bankruptcy plan. Generally, the monthly payment is the remainder of monthly household income after monthly household expenses are subtracted. The payment should cover just a little more than the amount that unsecured general creditors would expect to receive if you were in Chapter 7 and your nonexempt assets were collected for liquidation and distribution to them. In many cases, that amount would be nothing at all; in some cases, it can be a substantial sum.
Because of administrative expenses, you can assume that your monthly payments will add up to a minimum of five percent of your unsecured claims, plus the full value of non-dischargeable student loan or tax debts. You’ll also need to stay current with payments on secured claims, such as your mortgage or car note. Most people paying down a Chapter 13 plan find that they can manage the monthly payments without too much trouble, provided they don’t lose their jobs.
For a lawyer’s advice about Chapter 13 bankruptcy and the ways it can help you, contact Law Offices of Daniel G. Shay in San Diego for a free consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.