Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

The attorneys at TTMLAW have extensive experience handling complex chapter 7, chapter 13 and small business/individual chapter 11 proceedings. At TT&M LAW, we can provide the advice you need to make informed, responsible decisions about your financial future. We will analyze your debt relief options and give you an accurate assessment of what you should do, and whether bankruptcy or a non-bankruptcy restructuring workout is in your best interests.

Chapter 13 of the United States Bankruptcy Code, codified under Title 11 of the United States Code, governs a form of bankruptcy in the United States that allows individuals to undergo a financial reorganization supervised by a federal bankruptcy court. The goal of Chapter 13 is to enable income-receiving debtors a rehabilitation provided they fulfill a court-approved plan. This is in contrast to the goals of Chapter 7, which offers immediate and complete relief of many oppressive debts. It is a form of debt consolidation.

The debtor’s financial characteristics and the type of relief sought plays a tremendous role in the choice of chapters. In some cases the debtor simply cannot file under Chapter 13, as he or she lacks the disposable income necessary to fund a viable Chapter 13 plan (see below). Furthermore, Section 109(e) of Title 11, United States Code sets forth debt limits for individuals to be eligible to file under Chapter 13 the debt limits for filing Chapter 13 of unsecured debts of less than$ 383,175.00 and/or whose secured debt exceeds $1,149,525. These debt limits are subject to annual cost of living increases and represent values updated through April 1, 2013.

Under Chapter 13, the debtor proposes a plan to pay his/her creditors over a 3- to 5-year period. This written plan details all of the transactions (and their durations) that will occur, and repayment according to the plan must begin within thirty to forty-five days after the case has started. During this period, his/her creditors cannot attempt to collect on the individual’s previously incurred debt except through the bankruptcy court. In general, the individual gets to keep his/her property, and propose a repayment plan to creditors on percentage basis.

The Chapter 13 Plan

Chapter 13 plan is a document filed with or shortly after a debtor’s Chapter 13 bankruptcy petition.

The plan details the treatment of debts, liens, and the secured status of assets and liabilities owned or owed by the debtor in regard to his bankruptcy petition. In order for plans to take effect, it must meet a number of requirements. These are specified in § 1325 and include:

  • providing that unsecured creditors will receive at least as much through the chapter 13 plan as they would in a chapter 7 liquidation
  • either not be objected to, repay all creditors in full, or commit all of the debtor’s disposable income to the Chapter 13 plan for at least three years (or five years for a debtor who makes an above median income).

The advantages of Chapter 13 bankruptcy over Chapter 7 include the ability to: stop foreclosures and propose a cure or repayment of any back payments over a period of time ; achieve a super discharge of debts of kinds not dischargeable under Chapter 7;[1] value collateral; bifurcate the security interest of creditors in certain property that creditors are either charging too much interest for, or are over-secured, or both, and leading to a cram down modification of the debt; prevent collection activities against non-filing co-signers (co-debtors) during the life of the case.

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