Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy is often called a reorganization or 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 payments to creditors during a three year to five year period.Typically, a debtor decides what property he or she wants to keep, and what items will be surrendered.  The indebtedness on property that a debtor wants to keep, such as a car, are paid through the bankruptcy plan.  The debtor's paycheck is garnished by the US Trustee, and these monies are used to pay for the property the debtor is wanting to keep, the trustee fees, the attorney's fees, and a percentage to unsecured debts (such as credit cards and medical bills)-the payments may not be in the order listed.  A chapter 13 bankruptcy usually is reported on a debtor's credit report for 7 years.  A debtor may also include any arrears on their home in the bankruptcy plan.

*  Debtors may be able to repay the indebedness on their secured property, such as a car, at any interest rate of 5.25%.  We see folks that have cars financed at rates of up to 35% that we are able to get into a plan at 5.25%.

*  A Debtor may file a chapter 13 bankruptcy even though they received a chapter 7 bankruptcy discharge within the prior 8 years.

*  Debts not paid in full via the plan are typically discharged at the conclusion of the plan. 

*  Prior to filing a bankrutpcy case, a debtor is required to complete a course in credit counseling, which may be done via the internet or via telephone.  A second course in financial management is required to be completed prior to the receipt of a discharge.

*  Any garnishments are terminated upon the filing of a bankruptcy case.   Child support payments are not dischargeable and will have to be paid during the plan.

*  A chapter 13 bankruptcy case usually lasts from 3 to 5 years.

*  A debtor is allowed bankrutpcy exemptions to protect their property, see Chapter 7 Bankruptcy page, above.

The information contained herein is not intended to be legal advice.  Please call (256) 539-2121 for a FREE CONSULTATION to get legal advice from a local Huntsville attorney on your particular situation.  Bankruptcy is a serious legal process that can be complicated.  Hire a local attorney that you trust.