Chapter 13 bankruptcy is a type of bankruptcy that allows qualifying individuals to reorganize their debt into a repayment plan. Unlike Chapter 7 bankruptcy, which may discharge many unsecured debts without a long-term repayment plan, Chapter 13 allows you to make monthly payments through a bankruptcy trustee over a period of three to five years.
Chapter 13 may be a good option for people who earn too much to qualify for Chapter 7, are behind on a mortgage, need to stop foreclosure, want to protect a vehicle from repossession, or need time to catch up on secured debts. In many cases, Chapter 13 can reduce interest, stop late fees, stop collection activity, and allow you to repay debts in a more organized and manageable way.
How Much Do I Pay Back in Chapter 13?
The amount you pay back in Chapter 13 depends on your income, expenses, assets, debts, and the type of debts you owe. Your monthly plan payment is often based on disposable income. Disposable income is generally calculated by subtracting allowable living expenses from your income.
Not every Chapter 13 debtor pays all unsecured debts in full. Some people pay a portion of their unsecured debt, and qualifying remaining balances may be discharged after successful completion of the plan. Other debtors may be required to pay more depending on income, nonexempt assets, priority debts, tax obligations, mortgage arrears, vehicle loans, and other factors.
Because Chapter 13 payments are highly fact-specific, you should not assume what your payment will be until a bankruptcy attorney reviews your complete financial picture.
Why File a Tulsa Chapter 13 Bankruptcy?
There are several reasons someone may choose Chapter 13 instead of Chapter 7. One common reason is income. If your household income is too high to qualify for Chapter 7, Chapter 13 may provide protection.
Another common reason is the need to keep important property. Chapter 13 may allow you to catch up on missed mortgage payments over time and stop foreclosure. It may also help protect a vehicle from repossession, manage tax debt, repay secured debt, or deal with debts that cannot easily be handled in Chapter 7.
Chapter 13 can also be useful when you have assets that might be at risk in Chapter 7. Instead of surrendering property, you may be able to keep it while making payments through a court-approved plan.
Considerations Before Filing Chapter 13
Chapter 13 requires commitment. Most plans last three to five years. During that time, you must make regular plan payments to the Chapter 13 trustee. If payments are not made, the trustee or a creditor may ask the court to dismiss the case.
If the case is dismissed before completion, you may not receive a discharge. Creditors may resume collection activity, and secured creditors may again pursue foreclosure or repossession.
Because life can change during a three-to-five-year plan, Chapter 13 requires careful planning. Job changes, reduced hours, medical issues, divorce, marriage, increased expenses, or changes in household income may affect your ability to keep up with plan payments. In some cases, your attorney may be able to request a plan modification, but changes must go through the bankruptcy process.
What Happens Inside a Chapter 13 Bankruptcy?
When a Chapter 13 case is filed, your attorney submits a proposed repayment plan. The plan explains how creditors will be paid and how long payments will continue. The bankruptcy trustee and creditors may review the plan and object if they believe changes are required.
Getting a plan confirmed is not always immediate. Objections may arise if secured debts, mortgage arrears, vehicle loans, taxes, disposable income, or creditor claims are disputed. Your attorney works through these issues and seeks confirmation of a plan that complies with bankruptcy law.
Once the plan is confirmed, you continue making payments as required. After successful completion of the plan, qualifying remaining debts may be discharged.
Chapter 13 Attorney Fees
Chapter 13 may cost more than Chapter 7, but not all attorney fees are necessarily paid upfront. In many cases, part of the attorney fee may be paid through the Chapter 13 plan after the case is filed. This can make Chapter 13 more accessible for people who need immediate protection from foreclosure, repossession, garnishment, or lawsuits.
Before filing, your attorney should explain court costs, attorney fees, trustee payments, and how the plan will be funded.
Get a Free Chapter 13 Bankruptcy Consultation
If you are behind on bills, facing foreclosure, dealing with repossession, being garnished, or struggling with overwhelming debt, Chapter 13 bankruptcy may help you regain control.
For a free Chapter 13 bankruptcy consultation, call 918-739-8984 today.
