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Chapter 13 Bankruptcy

Chapter 13 Bankruptcy:
A Life-Changing Do-Over

Life is tough and our finances can get behind.  Sometimes we just need a financial do-over.  Chapter 13 Bankruptcy is a “Payment Plan Bankruptcy” where you can repay your creditors and get back on track.  If you need a financial do-over, Chapter 13 Bankruptcy might just be the solution you’ve been looking for:

  • If you are behind on your mortgage or HOA and you want to avoid a foreclosure (or stop a pending foreclosure, Chapter 13 Bankruptcy can allow you to “catch-up” on your loan, even if your creditor no longer accepts payments.
  • If you are behind on your car loan and want to avoid a repossession (and possibly get your car back that’s already been repo’d), Chapter 13 Bankruptcy can have you back on the road and driving again and can even save you money on interest.
  • If you have a tax lien or recent tax debt that is non-dischargeable, a Chapter 13 Bankruptcy can result in you paying off the tax debt and getting rid of the tax liens all with out having to pay penalties and possibly interest as well.
  • If you have a personal belonging that you might loose in a Chapter 7 Bankruptcy, such as your house or car, filing a Chapter 13 Bankruptcy may allow you to protect your treasured possessions and still get the debt relief you deserve.
  • If you make too much money to file a Chapter 7 Bankruptcy, but still need protection from your creditors, Chapter 13 Bankruptcy can give you the peace of mind you need.

Chapter 13 Bankruptcy:
Who Can File?

Anyone can file a Chapter 13 bankruptcy as long as (1) they have regular income, such as wages, self-employment earnings, social security or pensions (2) haven’t received another recent bankruptcy discharge and (3) doesn’t have too much debt.

A married couple can decide they both want to file and choose to file together, but they aren’t required to file together.  Bankruptcy is a personal decision, although your spouse will likely be instrumental in making the right decision.  If you are married, only one spouse is required to have regular income but both spouses need to meet to recent bankruptcy and the too much debt tests.

If you previously received a bankruptcy discharge, you may have to wait before you file again. You may need to wait two years if you filed a previous Chapter 13 Bankruptcy or 4 years if you filed a prior Chapter 7 Bankruptcy

Most people don’t have too much debt.  The debt limits were temporarily extended to $2,750,000 in 2022. Before that if you had more than $465,275 in unsecured debt or more than $1,395,875 in secured debt you couldn’t file a Chapter 13.  These numbers are adjusted periodically and you can find the current numbers here at the U.S. Bankruptcy Court’s website.  

Chapter 13 Bankruptcy:
What Debts Are Dischargeable?

When you file a Chapter 13 Bankruptcy, you will get rid of most, if not all, your debts either through the Chapter 13 bankruptcy Payment Plan or through the bankruptcy discharge.  Typical debts include mortgages, HOAs, tax liens, judgments, high-interest car loans, finance company loans secured by your personal belongings, furniture loans/leases, credit cards, online loans, medical bills, collection accounts, and deficiency balances on old repos and foreclosures.

You can expect to exit your Chapter 13 Bankruptcy with your mortgage and HOA current, the titles to your cars in your possession, and no unsecured debt, unless you have student loan debt, which  usually doesn’t go away.  Not every case is the same, but that is the goal of a successful Chapter 13 Bankruptcy.

Chapter 13 Bankruptcy:
How Long Does It Take?

When you file a Chapter 13 Bankruptcy, you are agreeing to make 36 or 60 monthly payments to your assigned Chapter 13 Trustee who then gives the money to to your creditors.  Once you have made all the required payments, several administrative tasks are necessary to receive your bankruptcy discharge.  These task can take two or more months to complete. So from the day your case is filed to the day your case closes will be at least 38 months and can be as many as 66 months. 

Chapter 13 Bankruptcy:
What All Is Involved?

Once you have decided filing a Chapter 13 Bankruptcy is the right decision, you will need to:

  • hire an experienced bankruptcy attorney
  • pay any fees
  • submit requested documentation, including driver’s license, social security card, vehicle registrations, bank statements, paystubs, tax returns, collection letters, etc.
  • participate in your client interview
  • take your first bankruptcy class – “Credit Counseling”
  • review and sign your bankruptcy documents
  • make your first payment plan payment 
  • take your second bankruptcy class – “Debtor Education”
  • attend your hearing
  • make the rest of your payment plan payments
  • request your discharge
  • receive your discharge

Chapter 13 Bankruptcy:
How Are My Payments Calculated?

Carefully.  There are lots of math and rules that go into a Chapter 13 Payment Plan calculation.  Your budget and your debts primarily determine how much you will pay.  The more you can afford to pay and the more debt you have the higher your Chapter 13 Payment Plan will be.  There is a minimum payment required in every case but depending on your budget, you may be required to make a larger payment.  Jackson Turner-Vaught, our Myrtle Beach Bankruptcy Attorney will calculate a payment range in your bankruptcy consultation to help you decide if a Chapter 13 Bankruptcy is right for you.

Chapter 13 Bankruptcy:
Is It Right For You?

Bankruptcy is complicated and a Chapter 13 Bankruptcy is made even more complicated because of the required payment plan.  If you think filing a Chapter 13 might be the right decision, you will want to review your finances with our experienced bankruptcy attorney to find out.  Don’t put off finding our another day.  Click the button to schedule your free bankruptcy consultation.