Chapter 13 is a type of personal bankruptcy for those that want to keep all of their property. This reorganization bankruptcy allows you time to catch up on your debt without losing any assets. This is an especially useful tool when you are in danger of losing your home or vehicle if you get behind in payments. To be able to file Chapter 13, you must have a reliable source of income to make your court-approved payments as well as keep up with any current obligations.
Payment Plan
When you file your paperwork with the court, you will also submit paperwork on how you plan to pay back the arrears. The court-approved plan will allow you three to five years to make monthly payments to the court. In Chapter 13, some of your debt must be paid in full, and your other debt will be paid from whatever you can from your disposable income. Disposable income for bankruptcy purposes means the amount of income left over after paying your expenses.
Some debt that must be paid in full:
- Your mortgage, sometimes you can negotiate better interest rates with your lender
- Your car note, if you have the cash, you can pay what the vehicle’s current value instead of the balance on the loan
- Back taxes
- You must also stay current on your alimony and child support
If you are hopelessly behind in your mortgage or vehicle payments and do not feel you can reasonably catch up or continue the payments after bankruptcy, you can give back your car or your home if you would like to reduce your debt.
Unsecured Debt
At the end of your chapter 13 bankruptcy, any unsecured debt remaining will be discharged. This includes credit cards, medical debt, payday loans, personal loans, past utility bills, and any other unsecured debt you still owe.
Some debt will not be discharged in bankruptcy:
- Alimony
- Child Support
- Fines and restitution to government agencies
- Current taxes
- Some student loans
If you are overwhelmed in debt and would like to know how filing bankruptcy can help save your home or eliminate your debt, contact a Houston bankruptcy attorney today.