Chapter 13 bankruptcy is a debt repayment plan in which you repay your debts,
without any interest, over a 3 to 5 year period. All debts are consolidated and you make one payment (usually monthly) to a trustee, who then issues payments to your various creditors.
The amount of the payments and the length of the plan are determined by your income
and expenses. If you are not required to repay all debts in full, the remaining debts at the
end of the repayment plan are discharged. However, just as with Chapter 7 bankruptcy,
any debt eliminated after the plan is complete must be eligible for discharge. Certain
debts such as student loans, recent tax debt, and child or spousal support cannot
There are a number of reasons that people may file Chapter 13 bankruptcy instead of Chapter 7. Some people simply make too much money and do not meet the income
requirements to qualify for a Chapter 7.
Some people may have filed a previous Chapter 7 bankruptcy within the past 8 years and thus are not eligible to file another Chapter 7 at this time.
Some people file Chapter 13 because they are behind on their mortgages or car loans. Many of these people are facing foreclosure or repossession of their property. Chapter
13 allows a person to keep up with current payments and make monthly payments toward the past-due balances.
This allows the debtor to keep his or her property and get current on the mortgage or car payments.
People may also file Chapter 13 because of tax debt. Certain tax debt is not dischargeable in a Chapter 7 bankruptcy. Chapter 13 allows the debtor to repay the tax debt over a 3 to 5 year period.
Another reason one may choose to file Chapter 13 bankruptcy over Chapter 7 is to keep non-exempt property. Some people have a large amount of valuable property. For
these people, filing Chapter 7 may require the debtors to give up some of the property.
Thus, instead of giving up the property, the debtors choose to file a Chapter 13 repayment plan and keep all the property.
In order to qualify for Chapter 13 bankruptcy you must have a regular source of income
that allows you to make the required Chapter 13 payments to the bankruptcy trustee.
In addition to the Chapter 13 payments, you must also have enough money to cover
necessary living expenses.
If you do not have the necessary income to qualify for Chapter 13 bankruptcy, you
may still be able to file Chapter 7.
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The protections under Chapter 13 are basically the same as those under Chapter 7. As with Chapter 7 bankruptcy, the automatic stay goes into effect as soon as the
Chapter 13 is filed with the court. The automatic stay serves to stop creditor harassment, stop creditors from taking any action to collect on the debt, and to stop foreclosure, repossession, and other types of lawsuits. In addition to these protections, there are some other advantages of Chapter 13 as discussed above as to why one may file Chapter 13 instead of Chapter 7.
Chapter 13 Bankruptcy is also known as Debt Repayment Bankruptcy
The fees for Chapter 13 bankruptcy are higher than the fees for Chapter 7. This is
because the attorney representation lasts throughout the 3 to 5 years of the repayment
plan. Both Chapter 7 and Chapter 13 bankruptcy are technical and complex, and the
decision to file either type of bankruptcy is not easy.
Kryshak Law Office offers FREE initial consultations to allow you to explore all of your options to your specific situation so that you are able to make an informed decision. In addition, Kryshak Law Office offers low fees and payment plans to make the process easier and more manageable during this difficult time.