Chapter 13: What’s it all about?

Most people face financial hardship at some point in their lives, and for those who owe just a little too much to be able to repay their creditors, Chapter 13 bankruptcy may be an option. While some believe that filing for bankruptcy is humiliating or too scary to consider, it is important to know that bankruptcy laws exist to protect debtors from their creditors and unmanageable debt.

West Palm Beach Chapter 13 Bankruptcy
Similar to Chapter 11 bankruptcy, Chapter 13 bankruptcy is also known as a reorganization bankruptcy, but it is meant for individual wage earners. This type of bankruptcy allows for a debtor to keep most or all of their assets and repay their debts to their creditors over a three- to five-year period through the use of a repayment plan.

In order to be eligible for Chapter 13 bankruptcy, you must have regular income that is enough to repay your debts within the allotted time period and your debt must not exceed a certain threshold. Currently, in order to file for Chapter 13 bankruptcy relief, a debtor must not have more than $394, 725 of unsecured debt and less than $1,184,200 of secured debt owed to creditors (as of February 1, 2018).

Chapter 13 Repayment Plans
The most important part of a Chapter 13 bankruptcy proceeding is the filing of a debtor repayment plan. This plan must be filed within 14 days of submitting the Chapter 13 petition that details how you plan on repaying your debts over the next three to five years in addition to explaining what priority, secured, and unsecured debts are owed. Priority debts are given special status in bankruptcy court and must be paid in full by the debtor. These include child support, alimony, employee wages, and certain taxes. Secured debts include collateral that a creditor can take if the debt is not paid, and unsecured debts come with no rights for the creditor to take any of the debtor’s property. Secured debts include things like a mortgage or car payment, while unsecured debts include credit cards and medical bills.

In a Chapter 13 repayment plan, all priority debts must be paid within the prescribed time period. In addition, the court must see regular payments being made to all secured debts in addition to payments on any debt in arrears. If there is any disposable income remaining, it must go towards the repayment of any unsecured debts. Once the payment period is complete, if the debtor has made regular payments on their debts anything remaining is wiped out by the bankruptcy court.