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Chapter 13
Bankruptcy
A Chapter 13 bankruptcy is a
reorganization of a debtor's debt with the debtor under the protection of the
bankruptcy court.
A Chapter 13 plan lasts between 36-60 months, and, upon successful
completion of the plan, the remaining debt is
discharged. A Chapter 13 is not for everyone.
In fact, a chapter 13 is worse for your credit then a chapter 7
(because you are in a bankruptcy for longer period); however,
there are many reasons why you have to file a chapter 13. The
main reasons a person is put in a Chapter 13:
- Disposable income
- To save a home from
foreclosure
- The need to protect an asset
- Previous Chapter 7 within eight
years
- IRS & State Tax Liability
- Threat of automobile
repossession
- Student Loans
- Back child support
- A situation where a Chapter 13
is safer for the debtor
Chapter 13 gives a
debtor the opportunity to reorganize their debts, pay the debts
that are non-dischargeable, and protect assets all with protection
from the Bankruptcy Court. For a Chapter 13 to be feasible, a debtor must have a
stable and regular income, must have disposable income and the
debts must not be too high.
The procedures in a Chapter
13 are the same as in a Chapter 7. The debtor meets with one of
our attorneys, we file the case, the
automatic stay is put into
place and the debtor attends the Meeting of the Creditors.
However, in a Chapter 13 the debtor begins to make payments 30 days
after the filing of the case, according to the Chapter 13 plan. The payments continue until the completion
of the plan. A Chapter 13 discharge comes after all the
proposed payments have been made- usually between 36-60 months.
Chapter 13 can be difficult. The
majority of debtors in Minnesota never complete their Chapter 13 repayment
plans. In fact, of all the Chapter 13 cases that are filed in
Minnesota only about 35% of all Chapter 13 debtors do. The
limitations, which include tight budgeting restriction by the
US Trustee, create a situation where the debtors are one small step
from being dismissed from the Chapter 13. Furthermore, debts that
are not included in the Chapter 13 or are
post-petition, need to be
kept current. However, our firm has a higher percentage of
complete Chapter 13 than the State of Minnesota as a whole. We do
not recommend Chapter 13 unless it is absolutely necessary for
the debtor. We work with the debtor to put together a budget which
gives the debtor the best chance for completion. Finally, during
the entirety of the plan, our office is available to assist if
complications arise.
After a Chapter 13 is filed, a
Chapter 13 can, in some instances, be modified to reflect a
debtors current income. In fact, a debtor has the right to convert
to a Chapter 7 if his or her situation changes so that a
Chapter 7 is best for the debtor.
If a debtor completes the plan,
the
Bankruptcy Court will issue a discharge. The debtor can begin to rebuild their credit after their
discharge and
begin to live without being under the yoke of the bankruptcy
court. |
