What is a Chapter 13 bankruptcy?
A Chapter 13 or “wage-earner” bankruptcy case allows you to pay your creditors through a repayment plan approved by the Court. The Plan in your bankruptcy case will range from 3 – 5 years depending on your income. If your income falls below the state’s median income level you may propose a plan length of 3 years. If your income is above the state’s median income level you will most likely have a 5 year plan.
How do you qualify for a Chapter 13 bankruptcy?
To qualify for Chapter 13 relief, you must have a regular source of income. Your unsecured debts must not exceed $383,175.00 and your secured debts must not exceed $1,149,525.00.
What happens during a Chapter 13 bankruptcy?
A Trustee will be appointed to your bankruptcy estate to ensure you abide by the plan requirements. The plan payments are usually paid to the Trustee to distribute to creditors. Depending on the bankruptcy case a wage order can be submitted to your employer to make the payments directly to the Trustee from your paycheck or you can be responsible for direct payments to the Trustee.
An automatic stay will go into effect upon filing stopping: car repossessions, garnishments, foreclosures, telephone calls, and civil actions filed by creditors attempting to receive a judgment. Secured creditors will have the opportunity to request a lift of the automatic stay.
Once you have completed your plan you will receive a discharge of allowable debts. Visit the Chapter 13 Bankruptcy Timeline for a list of common deadlines.
What debts are not discharged in a Chapter 13 bankruptcy?
The following debts are not usually discharged in a Chapter 13 bankruptcy case:
- Child support and alimony (spousal maintenance) or other domestic court orders
- Income Tax debts (unless taxes imposed 3 years before filing if returns honestly & timely filed)
- Student Loans
- Money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud
- Debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred on or within 90 days of filing
- Cash advances aggregating more than $750 obtained on or within 70 days of filing
- Personal Injury from drunk/intoxicated driving
- Criminal Fines & Restitution
- Restitution or damages awarded for personal injury or death caused maliciously or willfully