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Chapter 13 Bankruptcy: The Big Picture

May 22, 2018

There are significant benefits to filing Chapter 13 bankruptcy versus other forms of bankruptcy. In particular, the amount of debt you pay back in the end can be a fraction of the original debt.

With that said, because Chapter 13 is beneficial, there are also rather stringent qualifications and conditions.

  • You need disposable income. That is, you must have income that exceeds your expenses in order to afford the payment plan. In addition, this involves determining the nature of your debt.

  • Your debt must not exceed established limits. These limits change based on the consumer price index. There are different amounts for secured debt (including home mortgages, car loans) and unsecured debt (including credit cards and student loans).

  • Priority debt must be paid back. Priority debt includes tax liabilities that are less than three years old.

  • Debt on vehicles must be paid during the life of the plan. We often recommend putting a vehicle into a plan in order to retain the vehicle and pay it off.

If a person meets these qualifications and can abide by the conditions, then a Chapter 13 bankruptcy can be a good way to reorganize finances for the future and actually repay a percentage of the original debt.

As you can see, though, there are many complicating factors to every one of these qualifications and conditions That’s why, if you’re considering bankruptcy, the first step is to call us – we’ll help you determine if you can benefit from a Chapter 13 bankruptcy.