Bankruptcy

This kind of bankruptcy is sometimes called a “reorganization” for individuals and families. It permits debtors to keep all property that is exempt (the same exemptions that apply in a Chapter 7), but it requires debtors to make payments to the bankruptcy court.

The three most common reasons why a Debtor would have to file a Chapter 13 instead of a Chapter 7 are:

• A debtor’s income is higher than the debtor’s reasonable expenses, and so the debtor must pay that extra income into the bankruptcy court for three years to five years. If a debtor’s income is under the Median Income then the payment is for three years; if it over the Median Income the payment is for five years. A debtor’s payment is determined by looking at the Means Test, as well as the debtor’s current income and expenses.
• A debtor has property that is worth more than the exemptions the debtor has, but the debtor wants to keep property. The debtor must pay the court the value of the property and has up to five years to make the payment in full.
• The debtor owes a non-dischargeable debt, such as taxes, and wants the structure of the Chapter 13 to pay back those taxes, or the debtor wishes to catch up on a past due balance for a secured debt, where the debtor wishes to keep the collateral. For example, if you are behind in your house payments and owe $15,000 in past due payments, a Chapter 13 will give you the extra time you need to make those payments and stop the foreclosure. By filing a Chapter 13, you will have up to five years to pay that $15,000 back, provided you can keep up to date with your current payments as well. We can help you determine what your monthly payments will be, to help you determine if you will qualify for a Chapter 13 and if that is in your best interests.