Chapter 13 bankruptcy is a reorganization of debts designed to help property owners keep their homes, cars and other valuable assets while getting a handle on debts.

By filing Chapter 13, you may be able to stop foreclosure, repossession, wage garnishment and debt lawsuits, and significantly reduce or eliminate credit card debt.

Chapter 13 bankruptcy often provides relief for people who have faced short-term financial setbacks like job loss, illness or large unexpected expenses.

For people who have fallen behind on their bills but have regular income, filing bankruptcy under Chapter 13 may allow the breathing room they need to get back on track with their payments and keep their property.

Chapter 13 bankruptcy often provides relief for people who have faced short-term financial setbacks like job loss, illness or large unexpected expenses.

Many people looking to stop foreclosure or avoid repossession file Chapter 13 bankruptcy because it allows them to catch up past due payments over a period of three to five years while keeping current payments up to date.

When a person officially files Chapter 13 bankruptcy, they typically receive the protection of the automatic stay, which is a court order that prohibits further collection efforts from creditors.

That means the calls stop and most legal action (like foreclosure, repossession, lawsuits or wage garnishment) is ceased. Sound like what you’re looking for? Fill out the above form right now and talk to one of our sponsoring bankruptcy lawyers.

The Chapter 13 Bankruptcy Process

A Chapter 13 bankruptcy case officially begins with the filing of the bankruptcy petition.

In most cases, the court will enter an automatic stay as soon as the case is filed, prohibiting creditors from taking any further collection action while the bankruptcy case is pending or until further order of the bankruptcy court.

The bankruptcy court will send notice to all of the creditors listed in the Chapter 13 petition and will assign a bankruptcy trustee to the case.

Within about 15 days after the petition is filed, the court will send a Notice of Commencement of Case to the bankruptcy petitioner and to all of the creditors listed in the bankruptcy petition.

This notice will include important information like the time, date and location of the creditors meeting and the deadlines for claims and/or objections from creditors.

Schedules containing information about the petitioner’s debts, assets, income and expenses must be filed within 15 days after the case is commenced.

These schedules often are filed along with the petition; but where an emergency situation exists (for instance, if the petitioner is filing bankruptcy in order to stop foreclosure or repossession), they may be filed separately so that the petition can be filed immediately, without waiting to collect the required information and documentation for the schedules.

The 15-day deadline also applies to filing the Chapter 13 repayment plan.


The Chapter 13 Bankruptcy Repayment Plan

Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy doesn’t liquidate assets and discharge unsecured debts in a short period of time.

Instead, Chapter 13 bankruptcy is intended to help people facing financial difficulty keep their property while gradually catching up on past due balances.

A typical Chapter 13 bankruptcy repayment plan is between 36 and 60 months.

During that time, the bankruptcy petitioner keeps current payments current and makes monthly payments toward past due balances. Debts are prioritized by the bankruptcy court and secured creditors get paid first.

Remaining disposable income goes to pay unsecured creditors, in a hierarchy established by the Bankruptcy Code.

A good aspect to filing Chapter 13 bankruptcy is that if all payments have been made as scheduled, unsecured debt remaining at the end of the plan may be discharge

Can I File Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is not for everyone. In order to qualify for Chapter 13 bankruptcy, a debtor must:

  • Have a regular source of income from which to make pre-determined payments
  • Have enough disposable income to make regular payments after covering current ¬†¬†necessary living expenses
  • Fall within pre-set limits for secured and unsecured debts. The limits are updated periodically and a local bankruptcy attorney can tell you the exact current limits for secured debts.

For those who do not qualify to file Chapter 13 bankruptcy, filing bankruptcy may still be an option; but perhaps in the form of Chapter 7 or Chapter 11 bankruptcy.

Should I File Chapter 13 Bankruptcy?

Whether filing bankruptcy under Chapter 7 or Chapter 13 or going with another alternative outside the bankruptcy process is the best fit depends upon the debtor, the circumstances, the amount and nature of the debt, current income and a variety of other factors.

Often, people find Chapter 13 bankruptcy helpful when:

  • They are behind on payments on secured property that they want to keep. Many people file Chapter 13 bankruptcy petitions specifically to stop foreclosure or vehicle repossession, but Chapter 13 may be equally useful for catching up on other secured debts while keeping the property that secures the debt.
  • They have tax debts that cannot be discharged in a Chapter 7 bankruptcy case. Certain tax debts are non-dischargeable but some may be included in a Chapter 13 repayment plan and paid over time.
  • They have non-exempt property that they want to keep. In a Chapter 7 bankruptcy case, non-exempt property can be liquidated (sold) for the benefit of creditors, but in a Chapter 13 repayment plan, the debtor maintains his or her property while making scheduled payments.
  • They have filed for Chapter 7 bankruptcy within the previous eight years, and thus are not eligible to file Chapter 7.
  • They wish to protect co-signers on certain debts. In a Chapter 7 bankruptcy case, a co-signer remains liable for a debt even if that debt has been discharged for the primary debtor. However, if a debt is included in a Chapter 13 repayment plan, the co-signer is protected so long as the debtor complies with the plan.
  • They have past-due student loan debt. Student loans are not dischargeable in a Chapter 7 bankruptcy case except under certain very narrow circumstances, but some student loan debt may be included in a Chapter 13 repayment plan.