CHAPTER 13
Basic Chapter 13 Information
Entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.
Basic Terminology
Unsecured debts
include personal loans and credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, and other credit cards used to purchase consumable items such as clothing, food, vacations, etc. You may not file Chapter 13 if your unsecured debts exceed $337,000.
Secured debts include those debts where the creditor has a security interest in your property to guarantee payment. Examples of secured debts include mortgages, car loan, finance companies loans secured by household items such as furniture, computers or electronics. If you purchased store goods using a store credit cards from Circuit City, Rooms to Go, Best Buy, and others, they probably have a security interest in certain items purchased, making them secured creditors. You may not file Chapter 13 if your secured debts exceed $1,010,000.
Contact a Chapter 13 Laywer at Dominguez & Associates, P.A.
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