Chapter 13 Bankruptcy

A chapter 13 bankruptcy is also called a wage-earners plan, or reorganization. A Chapter 13 is used where you need to stop a foreclosure, reinstate a driver's license, or earn too much money to qualify for a Chapter 7 bankruptcy. Perhaps you want to make your best efforts to pay off your creditors. A Chapter 13 bankruptcy may be for you.

Chapter 13 is much more complicated than a Chapter 7. In order to enter a Chapter 13 bankruptcy, you have to propose a plan to the Court that states how you are going to reorganize your finances. If the Court believes you can make the plan work, and you have proposed the plan in good faith, the plan will be confirmed and your bankruptcy will be mostly complete.

Consider companies like K-Mart, WorldCom, American Airlines. They have all entered into a Chapter 11 bankruptcy. Chapter 13 is alot like a Chapter 11 but on a more personal level instead of a corporate level.

The critical issue to the Chapter 13 plan is that a payment must be made. You will make your first plan payment within 30 days of filing the plan. The monthly payment is critical to a Chapter 13 plan. In order to reorganize you contribute any existing disposable income to the plan which is then distributed by the Chapter 13 trustee to the creditors.

Disposable income is defined as money which is available after all the base expenses have been paid.

We compare Chapter 13 to Consumer Credit Counseling on steroids. Chapter 13 is one of the best financial tools available to prevent serious financial trouble before it starts. With a Chapter 13, it is possible to strip away debt that cannot be sustained, lower car payments, adjust interest rates on debt you choose to keep, and payoff other debt entirely.

Chapter 13 lets you rearrange your finances, repay a portion of your debts and put yourself back on your financial feet. The plan will last from three to five years. It takes time, but it can be an extremely successful way to alter your financial course and get back on track.

Extremely, you can use it to stop a house foreclosure, catch up on mortgage payments. You can actually lower your car payment and pay it off over the course of the plan. You can payoff your back taxes and stop interest from accruing on your debts.

The filing of the bankruptcy automatically stops all creditors in their tracks. This is because from the moment you file, the court extends its arms around you and protects your creditors. This protection is called the 'automatic stay.' Creditors cannot legally garnish your wages or your bank account. They cannot repossess your car, house, or other property. They cannot cut off your utility service or welfare benefits.

The ability we have to re write your contracts is unparalelled. You truly can completely reorganize your entire financial life.

Time. You have to commit to a plan between 36 and 60 months. Although there are recent developments in the law that allow for less than 36 months, in most cases, your plan will last for a minimum of three years. While that may seem like a long time now, the truth is, it will fly by. Imagine being able to be debt free in three years, having paid only what you could legitimately afford to pay and not having to borrow money to work your way out of debt.

Let's change the question and ask - "Who can't file for a Chapter 13 Bankruptcy?" Businesses cannot file for a 13 bankruptcy. If you own a business, you can file as an individual and include your business related debts. Everyone else can file for a Chapter 13 bankruptcy so long as your secured debts do not exceed $807,750.00 and your unsecured debts do not exceed $304,000.00

In order to file, you need to have a stable source of regular income. The money does not necessarily have to come from employment. It can be penson plan payments, social security, disability payments, unemployment benefits, child support or maintenance, royalties and rents, gifts of money from friends or family, and proceeds from selling property.

Once you have the money source, you have to have enough to fund the plan, this means you must have disposable income. It is your disposable income which will fund the plan.

The Jump Law Group will be able to provide you with an proper analysis when we actually meet with you. Until then, you can consult our table comparing Chapter 7 and Chapter 13 and review the rest of this answer. You can also start by using our online interview program.

You are probably a good candidate for a Chapter 13 if:

you are behind on your mortgage payments or car loan, and want to make up the missed payments over time.
you have taxes which are unpaid and are non-dischargeable.

you want to discharge certain debts in a Chapter 13 which are considered non-dischargeble in a Chapter 7.
you really want to pay off your debts, but simply cannot do it without the protection of the bankruptcy court.