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Bankruptcy Blog

8/3/2022

2 Comments

What is Chapter 13 Bankruptcy? FAQs & More

 

What is Chapter 13 Bankruptcy?

Chapter 13 is a debt reorganization. It is available to individuals, married couples and businesses that are not incorporated. Chapter 13 allows debtors to retain assets and pay all or part of their debt over a period of time while the bankruptcy protection bar creditors from trying to collect.  Debtors can repay back mortgage or car payments, pay taxes and avoid foreclosure and repossession. Chapter 13 is versatile and is an advantageous option for many people.

How does Chapter 13 Bankruptcy Work?

Chapter 13 bankruptcies work by allowing debtors to reorganize their debts and retaining assets. The debt reorganization is then paid off through a repayment plan that is set by the court.

FAQs

How long does bankruptcy Chapter 13 take?

A chapter 13 plan of reorganization can take anywhere between 3 and 5 years. How much money is paid into the plan and how long the plan term will be depends on a number of factors that your lawyer can help you determine

Can you buy a car while in Chapter 13 bankruptcy?

Yes.

Am I eligible for a Chapter 13 bankruptcy?

If you are an individual with earnings (wages, social security, pension, etc) or an unincorporated business you are eligible for a chapter 13. The amount of debt owed must also be less than the maximum listed in section 109 of the Bankruptcy Code

Can I buy a house while in Chapter 13 bankruptcy?

Yes. When you can buy a house while in an active chapter depends on how you intend to purchase it. For example if you intend to obtain a mortgage loan, the rules of the lender will determine eligibility. Often a debtor in  a chapter 13 can qualify for a mortgage loan one year after the filing while the reorganization is active

What does Chapter 13 do to your credit?

Like other public records, Chapter 13 bankruptcies can be reported on your credit report for up to 10 years, under the Fair Credit Reporting Act

Can a Chapter 13 bankruptcy be denied?

The goal of a Chapter 13 is to confirm a plan of reorganization. A chapter 13 can be denied if the debtor does not put forth a confirmable plan. If the amount of the debtor’s debt are higher than the debt limits under the Bankruptcy Code, the debtor may be ineligible for a chapter 13

Does Chapter 13 bankruptcy stop foreclosure?

Yes.

​If the bankruptcy petition is filed before the foreclosure sale is conducted, the automatic stay stops the foreclosure sale. The Chapter 13 reorganization can be used to keep the stay in palace while the debtor restarts mortgage payments and uses the plan to pay back the mortgage arrears (the past due amount). Real property tax auctions are also stayed by filing a chapter 13 and the taxes can be paid back through the plan as well.

2 Comments
Eli Richardson link
10/5/2022 07:55:47 am

It's good to know what you'll need to be a candidate for bankruptcy Chapter 13. I have an uncle who's facing a large debt and is worried about what would happen with his family's financial needs, so I think he must start considering alternatives before it gets worse. I appreciate your insight on checking bankruptcy Chapter 13 and its debt maximum.

Reply
Benjamin Garcia link
12/15/2022 11:14:36 pm

Quite an interesting read! A wage earner's plan is another name for a chapter 13 bankruptcy. It enables people with a steady income to create a plan to repay all or a portion of their obligations while the rest is waived off. Debtors offer a repayment plan to creditors in increments over three to five years under this chapter. Importantly, individuals in Chapter 13 can maintain their property while gaining time to pay off their obligations.

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