Personal Debt Repayment
The following is a brief discussion of Chapter 13 bankruptcy. It is for informational purposes only, and it is not in any way intended to give legal advice. To find experienced, qualified legal representation for your bankruptcy case, please contact The Bankruptcy Center of Joplin at 417-623-3771.
Chapter 13 Bankruptcy
Chapter 13 is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, Debtors propose a repayment plan to make installments to Creditors over three to five years.
If the Debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” (1) If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d).
During this time the law forbids Creditors from starting or continuing collection efforts without court approval.
Choosing Chapter 13 or Chapter 7
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time instead of all at once. Nevertheless, they must still make all mortgage payments that come due during the Chapter 13 plan on time.
Another advantage of Chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are jointly liable with the Debtor for “consumer debts.” This provision may protect co-signers.
Finally, Chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a Chapter 13 Trustee who then distributes payments to Creditors. Individuals will have no direct contact with Creditors while under Chapter 13 protection.
You should not choose a bankruptcy plan without the guidance of an experienced attorney. If you’re considering filing, call The Bankruptcy Center of Joplin at 417-623-3771. We can help you protect your financial future by working with an attorney knowledgeable in bankruptcy.