A Chapter 13 Bankruptcy allows you to set up a "repayment plan" with creditors while protecting your assets from liquidation. The amount you will pay to your unsecured creditors in a Chapter 13 bankruptcy will depend on your income, expenses, assets and the amount and types of debt you are seeking relief from. Don't assume that a Chapter 13 Bankruptcy will require you to repay 100% of your unsecured debts.
A Chapter 13 Bankruptcy allows you to repay certain tax debts and non-dischargeable domestic support obligations (child support or spousal maintenance) over a period of three to five years. A Chapter 13 Bankruptcy can also allows you to discharge some debts owed to a former spouse, provided the debts are not considered a domestic support obligation (child support or spousal maintenance).
You can file a Chapter 13 Bankruptcy to stop a foreclosure and keep your home. Your Chapter 13 Plan will repay mortgage and HOA arrearages over 3-5 years. You can also lien strip/remove a second mortgage/HELOC from your home under certain circumstances in a Chapter 13 Bankruptcy. Lien stripping is not available in a Chapter 7 Bankruptcy.
Chapter 13 is often referred to as a "debt reorganization" bankruptcy. Because of this, many people wrongly assume that a Chapter 13 Bankruptcy requires the repayment of all unsecured debts. In reality, most Chapter 13 Bankruptcy cases repay very little to the unsecured creditors.
A Chapter 13 Bankruptcy allows you to keep your home and your vehicles, repay non-dischargeable tax debts and child support/spousal maintenance obligations over time, discharge your unsecured debts and protect yourself from wage garnishment, foreclosure or a vehicle repossession. You will have the peace of mind knowing that you and your family are safe from creditor harassment.
Any individual or sole proprietor can file a Chapter 13 Bankruptcy. Business entities such as a corporation cannot file a Chapter 13 Bankruptcy in the name of the business.
In order to have the Trustee and Court approve or confirm your Chapter 13 Plan you will have to show that you are:
-current on your state and federal tax filings. It's ok if you have tax debt, you just have to show that you have filed all required tax returns.
-within the debt limits. The current debt limits for a Chapter 13 Bankruptcy are $419,275 for unsecured debts (credit cards, medical bills, signature loans, payday loans, etc.) and $1,257,850 for secured debts (real estate mortgages, car loans, etc.).
-employed or have some other regular source of income.
If you have unfiled tax returns, you should get them filed prior to filing a Chapter 13 Bankruptcy. Getting unfiled returns filed prior to filing a Chapter 13 Bankruptcy will give you a much clearer picture of what debts must be repaid and a much better idea of what to expect in terms of the plan payment. If there is an emergency (foreclosure, vehicle repossession or wage garnishment), you can still file a Chapter 13 Bankruptcy, but you will have a limited amount of time to file any outstanding tax returns before the Court dismisses your case.
Your income must be such that after deducting your regular payroll deductions and allowable living expenses there is a sufficient amount left over to make the monthly payment to the Chapter 13 Trustee. For example, if your plan requires a monthly payment of $500 but your disposable income after payroll deductions and living expenses is only $250, the Court will not approve your plan. It is important to work with an experienced bankruptcy attorney to determine if a Chapter 13 Bankruptcy is feasible for you.
Almost any type of regular income can be used to fund a Chapter 13 Plan:
-Self Employment Income
-Child Support or Spousal Maintenance
-Social Security & Pension Income
-Disability or Workers' Compensation
Be advised, under current case law, income derived from state legal marijuana industries cannot be used to fund a Chapter 13 Plan. If you are currently employed by a state legal marijuana business, you may not be eligible to file a Chapter 13 Bankruptcy.
Your total debt must fall below a certain threshold to qualify for a Chapter 13 Bankruptcy.
Secured debts are limited to a max of $1,257,850. A debt is secured if it is tied to property/collateral (real or personal) that can be repossessed if you fail to make the payments. For example, your home or vehicle are secured debts. The property acts as collateral for the underlying debt to the mortgage company or vehicle lender.
Unsecured debts are limited to a max of $419,275. Unsecured debts are not tied to any specific property. Credit cards, medical bills, utility bills, deficiency balances related to vehicle repossessions and broken leases are some examples of unsecured debts.
Contact Treguboff Law, PLC to help you determine if a Chapter 13 Bankruptcy is right for you. In many cases, we can file your Chapter 13 Bankruptcy for little to no money down. Call today to find out more.