Chapter 13 Bankruptcy, also called a “reorganization”, enables financially distressed individual debtors to propose and carry out a repayment plan that will allow them to pay back certain priority and secured creditors over an extended period of time. A person filing under Chapter 13 bankruptcy must show the courts that they have the resources to pay those priority and secured debts over the next three to five years. Otherwise, a judge will not approve the repayment plan. In addition, the filer must pay a percentage of their other, unsecured debts, dictated by the amount of disposable income of the filer
Under an approved Chapter 13 plan, a bankruptcy trustee appointed by the court will make the payments to the creditors.
Debts that must be paid in full include:
- Wages you owe employers.
- Any “priority” taxes that you owe.
- Any owed child support or alimony.
- Back payments on any loans secured by property you would like to keep (car, house, etc.)
Unsecured debts must be less than $336,900, and Secured debts must be less than $1,010,650.
In order to qualify for Chapter 13 bankruptcy, your income must not be less than a certain minimum to ensure that you can pay your debts. Sources of income to fund a chapter 13 plan can include:
- Any wages earned through employment.
- Any income earned through self-employment.
- Social Security benefits.
- Alimony or child support.
- Unemployment or disability benefits.
- Pension payments.
- Proceeds from the sale of businesses or properties.
As with a Chapter 7 bankruptcy, a person who wishes to file a Chapter 13 bankruptcy petition must first take a credit counseling course. Upon completion of this course, the debtor must present their certification of completion to the bankruptcy court, along with the many forms they will be required to fill out, their tax returns over the past five years, and a detailed repayment plan.
The filing of the petition under chapter 13 “automatically stays” most collection actions against the debtor, or the debtor’s property, while a repayment plan is worked out under the supervision of the courts. As long as the “stay” is in effect, creditors generally cannot initiate or continue any lawsuits, make wage garnishments, or even make telephone calls demanding payments.
I am committed to helping you through the Chapter 13 bankruptcy process. Baneylaw, P.C. is a debt relief agency that helps people file for bankruptcy relief under the Bankruptcy Code. I can help you develop your repayment plan so you can reorganize your financial life.