Often called the “wage earner’s plan,” Chapter 13 provides filers with the opportunity to consolidate all of their debt into a single monthly payment, paid to a court-appointed trustee who disburses the payment to your creditors. Unlike Chapter 7 bankruptcy, you’re not required to sell your belongings in order to pay creditors; instead, you’ll work with your attorney to propose a repayment plan to the court. If you make more than your state’s median income, the repayment plan will be in effect for five years. If you make less than the median state income, then you’ll only need to pay for three years.
At the end of the three (or five) year repayment period, the court will wipe out any remaining unsecured debt. As long as your total debt falls under the eligibility threshold and you make a regular income, then a Chapter 13 bankruptcy might be an incredible tool for reclaiming financial freedom.
Below, we’ve outlined some of the advantages and disadvantages of filing for bankruptcy under Chapter 13. If you have any questions, call The Huebner Law Firm, PC for a free consultation at (817) 576-1889.
Why File for Chapter 13 Bankruptcy?
Chapter 13 bankruptcy gives filers a chance to take control of their payments while simplifying their financial obligations. Instead of owing a dozen debtors who hound you day and night for payment, you can consolidate your debt into single repayment plan, letting your trustee handle the disbursement of your funds. Imagine not receiving a single call from a collector for the next five years—that’s the power of filing under Chapter 13.
The pros of filing for Chapter 13 include:
- Your debts are all consolidated into a single monthly payment.
- The amount of your payment is set according to your income.
- You do not need to surrender your home or car as long as you make payments.
- Your assets are not at risk of being sold.
- All accounts listed in the bankruptcy are removed after 7 years.
- Eligibility is based on your existing debt, not your income.
- You are legally protected from debt collectors for three to five years.
Any long-term debts in your name (e.g. student debt, mortgages) will not need to be paid in full over your repayment period, but these are among the few debts that will not be discharged at the conclusion of your case. Aside from secured debts and long-term non dischargeable debt, however, a Chapter 13 bankruptcy could free you from even more debts than a Chapter 7 might.
The Cons of Chapter 13 Bankruptcy
If you qualify for Chapter 13, there are still a few considerations to understand before filing. For instance, a repayment plan means your bankruptcy won’t be resolved for years. Additionally, you’ll still need to make your payments every month, so a regular income is vital to making this kind of bankruptcy work.
Other disadvantages to filing Chapter 13 include:
- You'll be making payments for three years minimum, up to five years.
- All your disposable income at the time of filing is committed to paying off debt.
- It will appear on your credit score for 10 years.
- You won't be able to file for Chapter 7 bankruptcy for 6 years.
Eligibility for Chapter 13 is contingent on how much you owe. You qualify for Chapter 13 if (and only if) your total unsecured debt is less than $394,725 and your secured debt is less than $1,184,200. Keep in mind that the threshold will change depending on the Consumer Price Index every year, so check the US Courts site periodically for the updated requirements.
Call an Experienced Fort Worth Chapter 13 Bankruptcy Lawyer at (817) 576-1889
Since 1998, The Huebner Law Firm, PC has provided individuals and companies with the tools to reclaim their financial freedom. Our firm provides straightforward and understanding counsel, giving our clients legal and financial strategies backed by decades of experience. If you want to know whether Chapter 13 bankruptcy could work for you or how you could create a repayment plan that serves your interests long term, speak with our law firm today.
Contact our Forth Worth Chapter 13 bankruptcy attorney today at (817) 576-1889!