Chapter 13 Bankruptcy – What is it?

To many people, bankruptcy feels like the final stop to financial ruin. It’s viewed as the last remaining option when surrounded by overwhelming debt.  But there is hope even in bankruptcy, and Chapter 13 may offer the softest landing in a fresh start.  Working with an experienced bankruptcy attorney will help you sort through the process and determine what path is best for you and your financial journey.  Bankruptcy isn’t the end of the road. It’s the beginning of a new one.

What is Chapter 13?

Chapter 13 bankruptcy is often referred to as the Wage Earner’s Bankruptcy or restructuring bankruptcy. It is bankruptcy for those working and making money but have fallen behind on payments for things bought on credit. Chapter 13 allows you to develop a plan to repay all or part of your debts and gives you the time to catch up.

Under Chapter 13, you have three to five years to repay debts. Most, if not all, of your disposable income will be used directly to pay creditors a portion of what is owed.  You may be able to eliminate unsecured debt, such as credit card payments, while catching up on your mortgage or your car.

How Does Chapter 13 Work?

Chapter 13 begins with filing a petition with the bankruptcy court. Once filed, the automatic stay becomes effective.  This prohibits most creditors from taking further collections action against you; It halts calls, lawsuits, garnishments, and foreclosures.  Chapter 13 reorganizes your debt and consolidates it into one monthly payment made to your trustee.  The trustee then disburses the funds to your creditors as decided in terms of your repayment plan.

To qualify for Chapter 13, you must:

• Have a steady income.
• Not received a discharge in a case filed under Chapter 13 bankruptcy for two years or under Chapter 7 for four years.
• Not have unsecured debt of more than $419,275*, and your secured debt cannot be more than $1,257,850*. (*secured and unsecured debt limits for chapter 13 are adjusted each year.)
• There may be more exclusions than listed here. You should consult an experienced Bankruptcy attorney to discuss if Chapter 13 Bankruptcy is right for you.

And you must provide:

• A list of all creditors and the amounts and nature of their claims
• The source, amount, and frequency of your income in your household
• A list of all the real and personal property
• A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Chapter 13 suspends pending foreclosures and payments of other debts owed. This gives you breathing room while the court considers your repayment plan. Keep in mind that this does not eliminate the debt. This plan hopefully frees up enough of your income to make regular payments and keep your property.

Advantages of Chapter 13

Chapter 13 buys you time to get your finances in order. It extends the time you have to repay debts.  It also offers several other advantages:

• You may keep all of your property
• Debts that cannot be discharged under Chapter 7 may be managed under Chapter 13
• Chapter 13 helps to avoid wage garnishment
• Co-signers may be protected
• Foreclosure on your home may be delayed or avoided altogether
• Chapter 13 can be filed immediately after Chapter 7 discharge to manage any remaining debts
• Offers the provision under which interest rates on certain loans may be reduced through reaffirmation or redemption.
• Payment terms on most debts can be extended under Chapter 13.

As with any form of bankruptcy, it will stay on your credit for seven years.  Chapter 13 may make borrowing more difficult in the future also. Finances may be tighter during the process of paying back debts.  And as overwhelming as all of this sounds, working with a Florida Chapter 13 attorney can make the process a little less scary.  Miller, Hollander and Jeda know the ins and outs of Chapter 13 bankruptcy and have 35 years of experience helping individuals eliminate their debt and keep their hard-earned property.  They can assist you in all areas of Chapter 13, including:

• Determining your eligibility based on your income and debt level.
• Filing a bankruptcy petition with complete disclosure of what you own, what you owe, and anything owed to you
• Creating a debt adjustment and repayment plan to pay off debt, usually within three to five years
• Getting your plan approved by a bankruptcy judge

Getting a fresh start doesn’t have to be intimidating.  Contact us to determine the path to recovery that best suits your needs.

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Miller, Hollander & Jeda’s founding attorneys began practicing in the early 1970s before putting down roots in the area and joining forces in 1992 to create the Naples, Florida, law firm that bears their names. Since its inception, Miller, Hollander & Jeda has focused on bankruptcy. The goal of our attorneys and our experienced staff, established at the outset and built upon year by year, is to use our extensive knowledge of bankruptcy law to answer the complicated questions you have regarding your financial trouble and help you solve your problems. We take pride in helping clients get a fresh start.