Chapter 13 Bankruptcy

A lot of people file Chapter 7 bankruptcy and just have their debts wiped clean. They get a fresh start that way, but they may also lose some of their assets, and not everyone is eligible. For people who are earning steady wages, Chapter 13 is often a much better option because it allows a person to come up with a plan to repay a portion of the debts that are owed and receive a complete discharge of the debts. You may also be able to keep your house, car and other assets.

If you are in this position, you need to see a lawyer about filing for a Chapter 13 bankruptcy. Like a Chapter 7, it is not something that you should try to do on your own. You will need a lot of paperwork. You have to itemize your debts and your income and provide major financial transactions that you have taken part in during the last two years. You will need income tax statements, car titles, and a lot of other financial information. You will have to follow the guidelines that the state has set out and adhere to the schedule that is designed for you if you are required to file Chapter 13.

Some of your property may be exempt, as well, and you will need to make sure you exclude it properly if you want to keep it. You usually have between three and five years to repay the debts that are included in a Chapter 13 bankruptcy and most of the debts usually have their interest rates and principal amounts adjusted so that they are easier to repay. Payments must be made properly to minimize the damage to your credit, but if something serious and beyond your control keeps you from completing the plan, a hardship discharge is also possible, which would be more like a Chapter 7 bankruptcy proceeding.

Chapter 13 bankruptcy as defined by the United States Bankruptcy Court in the Eastern District of California:

Chapter 13 is the debt repayment chapter for individuals with regular income whose debts do not exceed $1,347,550 ($336,900 in unsecured debts and $1,010,650 in secured debts), including individuals who operate businesses as sole proprietorships. It is not available to corporations or partnerships. Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income. Each chapter 13 debtor proposes a repayment plan which must be approved by the court. The amounts set forth in the plan must be paid to the chapter 13 trustee who distributes the funds for a percentage fee. Many debts that cannot be discharged can still be paid over time in a chapter 13 plan. After completion of payments under the plan, chapter 13 debtors receive a discharge of most debts.

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