What is Chapter 13?

The wage earner’s bankruptcy.

Chapter 13 is often referred to as the “wage earner’s bankruptcy” or a “reorganization bankruptcy” because it gives people with a steady income the chance to dramatically reduce their debt while keeping the assets they want. Like Chapter 7, you have the chance to eliminate ( discharge ) some or all of your debt. Unlike Chapter 7, you will have to make payments to the bankruptcy trustee, but at the same time you will be permitted to keep more assets than your exemptions allow.

Upon the filing of your Chapter 13 bankruptcy garnishments, lawsuits, foreclosures, repossessions and other actions by your creditors are stopped automatically by federal law!

Chapter 13 gives us more “tools” to use in working with your debts. If you are behind on a mortgage or car loan we may be able to “catch it up” over a prolonged period of time through your plan whereas in a Chapter 7 there is no method to “catch up” on a debt. On certain auto loans we may be able to “cram down” the amount of the loan to the current market value of the auto so that you are no longer upside down. We may also be able to reduce the interest rate on a car loan to something more reasonable. Certain debts incurred in the process of a divorce are subject to discharge in Chapter 13 whereas in Chapter 7 they are excluded.

Chapter 13 further allows an individual who might otherwise be ineligible for a Chapter 7 bankruptcy a chance to obtain protection and relief from his or her debts. Even persons with a significant income and substantial assets may benefit from the protections afforded under Chapter 13.

Have any questions about your financial situation ... contact us!