Chapter 13 bankruptcy is an effective debt relief solution for people who want to keep some of their secured assets, like their homes, while eliminating their unsecured debt. Also referred to as reorganization bankruptcy, Chapter 13 bankruptcy will generally require people to develop detailed plans for repaying their creditors (rather than liquidating assets to repay creditors, as in Chapter 7 Bankruptcy).
Chapter 13 Bankruptcy: When to Consider Filing
The most common reasons for filing a Chapter 13 bankruptcy is to pay recent taxes, cure mortgage arrears to avoid a foreclosure, or to cure past due car payments to avoid repossession. People who may also be best-served filing for Chapter 13 bankruptcy can include those who:
- Earn too much money to qualify for Chapter 7 bankruptcy (i.e., did not pass the “means test” for income reasons)
- Want to retain their secured assets through the bankruptcy process
- Have a substantial portion of debt that is non-dischargeable in Chapter 7 bankruptcy (such debt can include, for instance, certain types of tax debt, child support debt, etc.)
- Have filed for bankruptcy in the recent past and need to seek this type of debt relief again.
There can be a number of other situations in which filing for Chapter 13 bankruptcy will be in an individual’s (or a business’) best interests, so don’t hesitate to contact the experienced Denver bankruptcy attorneys at Garcia & Gonzales, P.C. for professional, honest advice about your best options.
Chapter 13 Bankruptcy: Repayment Plans
As previously noted, Chapter 13 bankruptcy will require people to devise very detailed plans regarding how they intend to repay their various creditors over the next three to five years. While these plans (known as repayment plans) can outline how certain debt will be repaid in full (like mortgage debt when people want to keep their homes after bankruptcy), they can also provide for the partial repayment of unsecured debt (like credit card debt, etc.), depending on the judgment in a given case.
Here are a few more important things to know about repayment plans in Chapter 13 bankruptcy cases:
- Repayment plans must be devised and delivered in “good faith,” meaning that the debtor has every intention of following through with the plan.
- With repayment plans, creditors must be able to obtain at least as much repayment as they would under a Chapter 7 case.
- Creditors can contest people’s proposed repayment plans, and it will ultimately be up to the Bankruptcy Court to approve these plans in Chapter 13 bankruptcy cases.