1. The individual does not pass the “Means Test” and therefore cannot file Chapter 7 bankruptcy;
2. The individual has fallen behind on secured debt payments (such as a mortgage or auto loan), and wishes to get caught up on the payments, keep the secured collateral (the house or the car), and avoid repossession or foreclosure;
3. The individual has non-exempt assets which would be subject to liquidation in Chapter 7 bankruptcy but would prefer to keep these assets;
4. The individual has non-dischargeable debts.
Filing Chapter 13 bankruptcy will help protect your assets from foreclosure and repossession. It will also discharge your unsecured debts just like Chapter 7 bankruptcy. The difference is, in Chapter 13 bankruptcy, you are required to make a monthly plan payment. A Chapter 13 bankruptcy, sometimes referred to as personal reorganization, is essentially consolidating your debt into one monthly payment. Subject to a bankruptcy trustee’s approval, our office will propose a Chapter 13 plan that will hopefully allow you to make affordable monthly payments and generally pay off the debt within three to five years. Whatever portion of you debt is not paid off becomes discharged at the end of your bankruptcy.
Certainly the amount of your Chapter 13 plan payment, as well as the length of your plan, are important questions in Chapter 13 bankruptcy. The length of your plan is determined by comparing your income to the median income for a household of the same size as your own. If you are “over median”, then you are forced into a five year plan, and must pay all of your disposable income to your unsecured creditors. Your disposable income is calculated by deducting some of your actual monthly expenses along with some statutory standards. After all the expense deductions are made, you are left with your disposable income. If you are “under median” you can have a plan as short as three years.
Just like in Chapter 7 bankruptcy, in Chapter 13 bankruptcy you are usually only required to make one court appearance for your 341 Meeting of Creditors, often referred to simply as your “341.” Prior to your creditors meeting, our office will accumulate and submit all the documents that the trustee requires, which should simplifiy the meeting. The meetings are usually very brief, and the trustee will just ask you a few simple questions regarding your finances and the reasons for your bankruptcy filing.
If you are looking to catch up on mortgage payments, pay non-dischargeable debts, remove a second mortgage, or pay off unsecured debts while keeping non-exempt assets, then Chapter 13 bankruptcy may be right for you.