What is a Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy requires you to propose a payment plan through which you will pay back some or all of your debt over 3 to 5 years. Chapter 7 bankruptcy does not involve a plan, but Chapter 13 has some advantages over Chapter 7.
For example, in a Chapter 13 bankruptcy you can catch up past due mortgage payments in
order to stop a foreclosure on your house. You can also propose a plan to pay off tax debts over several years to keep the IRS and the Colorado Department of Revenue from taking money out of your paycheck.
In some cases you can use a Chapter 13 bankruptcy to restructure a car loan if the amount owed on the loan is more than the car is worth.
Some individuals are able to use Chapter 13 bankruptcy to strip 2nd mortgages off of their property.
Some of our clients choose Chapter 13 over Chapter 7 because they have property, such as their residence, that would be sold if they filed a Chapter 7 bankruptcy. Chapter 13 allows them to keep their property and pay their debts over several years. Every case is unique, and our attorneys can help you determine which chapter of bankruptcy is right for you.
Do I qualify for Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is available to individuals (not businesses) who have regular income, and whose unsecured debts are less than $419,275 and secured debts are less than $1,257,850. (Examples of unsecured debts include credit cards, medical bills, and taxes, and secured debts include mortgages, car loans, and any loans that involve collateral).
Some of our clients file Chapter 13 bankruptcy because they have too much income to qualify for Chapter 7 bankruptcy, or because they have equity in their home above the exemption amount.
An individual will not qualify for a chapter 13 discharge if they filed a previous Chapter 7 bankruptcy less than 4 years ago.
Even if you do not qualify for a Chapter 13 discharge, filing a Chapter 13 case will stop a foreclosure and allow an individual to become current on their mortgage payments.
How does the Chapter 13 Bankruptcy process work?
As with Chapter 7 bankruptcy, the first step for our clients is to gather all of the necessary
documentation and information that we use to complete the legal documents that will be filed with the bankruptcy court. We also help our clients prepare a proposed repayment plan that will be submitted to the court and sent to creditors.
About one month after a bankruptcy case is filed, the debtor is required to attend a hearing called the Meeting of Creditors. We accompany our clients to these hearings and help prepare them for the questions they will be asked.
We work with our clients to respond to objections to the proposed repayment plan and to prepare amended plans to submit to the court. In most cases, the Chapter 13 repayment plan is approved and confirmed by the court several months after the case is filed.
A debtor in Chapter 13 bankruptcy can receive a discharge of debts after all of the payments in the Chapter 13 repayment plan have been made and the plan terms have been completed. This usually happens 3 to 5 years after the case is filed.
How do I find out more information?
Give us a call - we will be happy to schedule a free 1-hour consultation.