Chapter 13 Might Work When Chapter 7 Won't
Although we usually recommend bankruptcy under Chapter 7 for people who can meet the eligibility requirements, Chapter 13 can also help people get immediate relief from creditor pressure while paying back a portion of their debts. In some situations, Chapter 13 can even be the better choice for people who qualify for Chapter 7. To learn more about your bankruptcy options, discuss your situation with a knowledgeable bankruptcy attorney. Contact Daniel Shay Law in San Diego for a free initial consultation.
Call 619-222-SHAY for Advice About Chapter 13 Bankruptcy
The distinctive feature of Chapter 13 is the repayment of a portion of your debts. In Chapter 7, you get your discharge from all eligible indebtedness within four to six months of filing your petition. In Chapter 13, you get your discharge after you've paid part of your debts under a monthly payment plan that lasts three to five years.
Most people seek Chapter 13 relief because they can't satisfy the means test necessary to file a Chapter 7 case. In some situations, however, such as when you want to keep assets that you can't exempt in a Chapter 7 case, we can figure out the value of those assets and include it in your Chapter 13 plan payments.
Chapter 13 is also useful for paying off past-due arrearages on mortgage or car payments, and for paying nondischargeable debts over time to student loan agencies or tax authorities. The Chapter 13 debt repayment plan is intended to serve as the exclusive means of paying down your indebtedness; as long as you perform on the plan your creditors will not be able to pursue you otherwise.
How Much Do I Need to Pay in Chapter 13?
It's up to the debtor to propose the amount of the monthly payment under a Chapter 13 plan. It should cover just a little more than the amount that unsecured general creditors would expect to receive if you were in Chapter 7 and your nonexempt assets were collected for liquidation and distribution to them. In many cases, that amount would be nothing at all; in some cases, it can be a substantial sum.
Because of administrative expenses, you can assume that your monthly payments will add up to a minimum of 5 percent of your unsecured claims, plus the full value of nondischargeable student loan or tax debts. You'll also need to stay current with payments on secured claims, such as your mortgage or car note. Most people paying down a Chapter 13 plan find that they can manage the monthly payments without too much trouble, provided they don't lose their jobs.
Sometimes so-called "Chapter 20" offers the best approach toward a bankruptcy discharge. If you qualify for Chapter 7 on the basis of household income, but have substantial nondischargeable debt, you can file first for Chapter 7 to get the protection of the automatic stay and a discharge of many unsecured claims, then file for Chapter 13 to work out a payment plan on the remaining debts.
For a lawyer's advice about Chapter 13 bankruptcy and the ways it can help you, contact Daniel Shay Law in San Diego for a free consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.
