If you owe substantial debts but believe you may be able to pay off your creditors in the next three to five years, filing for Chapter 13 bankruptcy may be your best option. Under a Chapter 13 bankruptcy, the debtor creates a repayment plan that involves making payments from future income to pay off debts. Certain situations exist in which a Chapter 13 bankruptcy is particularly useful, including situations in which you are behind on a loan. In short, filing for a Chapter 13 bankruptcy may allow you to stay in your home or keep your motor vehicle even if you are desperately behind on your payments.
The law firm of Caroline Secor has been assisting residents of Palm Harbor for years with bankruptcy proceedings. Don’t hesitate to contact an experienced Florida bankruptcy lawyer at our firm to discuss your situation.
Filing for a Chapter 13 Bankruptcy
While both types of bankruptcy proceedings may be beneficial for debtors, a Chapter 13 bankruptcy is much different from a Chapter 7 bankruptcy. The key difference is that a Chapter 13 bankruptcy permits the debtor to cover his or her existing debts with future income, and there’s no liquidation.
If assets aren’t completely liquidated as with a Chapter 7 bankruptcy, what happens when a consumer files for a Chapter 13 bankruptcy? Typically, the debtor will take a number of steps to repay a percentage of his or her debts owed over the course of a repayment period. These steps usually involve the following:
- Repayment Plan: The debtor will create a repayment plan, which typically falls between three and five years’ time. You will file the repayment plan when you file for bankruptcy, and it will specify how long it will take you to repay your debts and how much you will pay on your debts during the repayment period.
- Sticking to the Repayment Plan: When debtors are able to abide by the terms of their repayment plans, any remaining dischargeable debt will be discharged.
Unlike with a Chapter 7 bankruptcy, you will need to be able to prove that you have a regular source of income with enough disposable income that you will be able to meet the terms of your repayment plan. The Florida means test will determine how much debt will be repaid at the end of the period.
Benefits of a Chapter 13 Bankruptcy
There are many advantages of a Chapter 13 bankruptcy. In general, Florida residents with assets that they want to keep, like a motor vehicle or a home, may want to consider a Chapter 13 bankruptcy. In addition, if you have property that’s non-exempt in Florida, a Chapter 13 bankruptcy also may allow you to keep your property when a Chapter 7 bankruptcy won’t.
This type of bankruptcy can also be a very useful tool for reorganizing debts, and it can help debtors who are behind on payments. For example, a Chapter 13 bankruptcy can do some of the following for you:
- Prevent a foreclosure on a house when you are behind on mortgage payments
- Prevent interest from accruing on certain debt
- Help you to catch up on missed mortgage payments
- Help you to catch up on missed automobile payments
- Help you to catch up on back taxes you owe
- Allow you to renegotiate some of the terms of your debts
- Allow you to retain certain property that is non-exempt
The federal government passed new bankruptcy reform legislation in October 2005. However, don’t be discouraged! Most studies indicate that the new law affects less than 15% of individuals who could have filed previously. If you are feeling overwhelmed by your debts and considering filing bankruptcy, it is highly probable that you fall into the category of the 85 percent of people who are still eligible to file.