Chapter 13 bankruptcy is the more complex and lengthy type of personal bankruptcy.
Unlike its counterpart (Chapter 7) a Chapter 13 bankruptcy does not simply wipe the slate of
debt completely clean. A Chapter 13 bankruptcy involves a 3-5 year repayment plan in which
the debtor is allowed to pay back a certain percentage of their overall unsecured debt. If you are
facing large amounts of secured or unsecured debt, then filing a Chapter 13 bankruptcy may be
a good option for you.
Filing a Chapter 13 bankruptcy can be beneficial for individuals or married couples who
are facing foreclosure, vehicle repossession, or high amounts of other types of debt. The
Chapter 13 repayment plan will include the arrearages (back payments) on items like your
home so that at the end of the 3-5 years you will not only be debt free, but caught up on all of
your payments. Typically if the household income of the debtor exceeds the state median the
court may direct them to file a Chapter 13 bankruptcy because it seems that they have enough
money to pay some of their debt off. The percentage of unsecured debt that is placed into the
payment plan is calculated by looking at the debtor’s “disposable monthly income” or how much
money they have left at the end of the month after all necessary bills have been paid.
Unlike Chapter 7 bankruptcy, if you are filing a Chapter 13 bankruptcy it is highly
recommended that you hire an attorney to help you with the process. Not only is the attorney
necessary to correctly calculate the repayment plan, but he or she will also be a direct line of
communication between you and your bankruptcy trustee throughout the 3-5 year plan. Having
an attorney during the Chapter 13 process will also put your mind at ease because you will
know that your questions can be quickly answered.
Throughout your 3-5 year payment plan your case will be overseen by a bankruptcy
judge known as a trustee. You will initially meet your trustee at the mandatory “meeting of
creditors” soon after your case is filed. This court appearance will only last 10-20 minutes and
will involve the trustee asking you simple question about your finances to ensure no fraud has
taken place. The trustee receives the monthly payments from the debtor and is in charge of
dispersing them to the correct creditors at the right time.
Bankruptcies come in all shapes and sizes, whether it is someone merely getting rid of
a few thousand dollars in credit card debt, or a family wiping away hundreds of thousands of
dollars in medical debt due to an emergency surgery. Filing Chapter 13 bankruptcy has helped
thousands of Americans halt their foreclosure or repossession process in order to give them
time to reorganize and catch up on their payments. If you are facing one of those issues, or any
other debt related struggle you should contact a bankruptcy attorney to hear more about your