In Chapter 13 bankruptcy, you propose a payment plan to your creditors, and it usually lasts three to five years. Offer to pay all or part of your debt with future income you earn. You can use Chapter 13 to offset late car payments, pay back taxes you owe, prevent a bank from foreclosing your home, keep non-exempt property that you consider valuable, prevent interest from accruing on your tax debt and much more. When you follow the terms of your agreement to pay off your debts, all your remaining dischargeable debts will be released at the end of the payment period. The monetary amount allocated to creditors under a Chapter 13 bankruptcy must equal the amount they would have received if a Chapter 7 bankruptcy had been filed. To file for Chapter 13 bankruptcy, you must have a “regular source of income “and disposable income to apply to your refunds.
Typically, a Chapter 13 bankruptcy is used when you want to keep secured assets, such as a car or home, where you have more equity in the secured assets that you can protect by using your bankruptcy exemptions. It is a reorganization of the debts that you owe to your creditors that are not non-dischargeable debts.
A Chapter 13 bankruptcy allows you to get back your past due payments over time and reinstate your original payment agreement. It may also be a better option when you have valuable non-exempt property that you want to keep. To keep non-exempt property, you must pay the creditor for the property’s value.
An exemption limit would apply to any equity you have on the property. Equity is simply a difference between the value of the property and what you owe. For example, if you have a truck valued at $ 10,000 with a loan of $ 8,500, the truck only contains a net worth of $ 1,500. When you have a property that is in the hands of a loan, the equity that you own in that property is covered by your exemptions. That is if you are up to date with your payments. Also, if you choose to continue making normal loan payments, you can keep the property for the entire period and after the bankruptcy period ends. If the equity is not covered by your exemptions, your creditor can choose to sell that asset and then distribute the money resulting from the sale. In this case, you would be entitled to the value of your exemption on the asset sold as a cash payment. Current bankruptcy laws allow a married couple to file a full set of exemptions together for each claim, meaning that more property can be protected.
Non-dischargeable debts that you cannot clear in bankruptcy include DWI / DUI personal injury / death debts, back child support, alimony, debts related to family support, student loans, income tax debts within the past three years, as well as any other tax debts, traffic ticket fines, criminal restitution, and any debt you forget to include on your bankruptcy documents, unless you inform the creditor of your bankruptcy case. Aside from those non dischargeable debts, everything else included in your bankruptcy case will be liquidated at the end of the agreed bankruptcy period.