Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy is a form of reorganization. A Chapter 13 case is filed by individuals who want to pay off their debts over a period of three to five years. This type of Bankruptcy is useful for individuals who have non-exempt property that they want to keep, mortgage arrears or tax debt. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off certain debts.

There are many reasons why people choose Chapter 13 Bankruptcy instead of Chapter 7 Bankruptcy. Generally, you are probably a good candidate for Chapter 13 Bankruptcy if you are in any of the following situations:

You have a sincere desire to repay your debts, but you need the protection of the Bankruptcy court to do so. You may think your income exceeds your monthly expenses but is insufficient to pay those debts in full.
You are behind on your mortgage or car loan, and want to make up the missed payments over time and reinstate the original agreement. You cannot do this in Chapter 7 Bankruptcy. You can make up missed payments only in Chapter 13 Bankruptcy.
You have valuable nonexempt property. When you file for Chapter 7 Bankruptcy, you get to keep certain property, which is called exempt. If you have a lot of nonexempt property which you'd have to give up if you file a Chapter 7 Bankruptcy, Chapter 13 Bankruptcy may be the better option.
You filed a Chapter 7 Bankruptcy within the previous eight years. You cannot file a Chapter 7 again until the eight years are up.

A Chapter 13 can be filed if:

The debtor received a discharge under Chapter 13 more than two years ago.
You have a co-debtor on a personal debt. If you file for Chapter 7 Bankruptcy, your creditor will go after the co-debtor for payment. If you file for Chapter 13 Bankruptcy, the creditor mut leave your co-debtor alone, as long as you keep up with your Bankruptcy plan payments.
You have a tax debt. If a large part of your debt consists of taxes, paying them through a Chapter 13 Plan frequently is the most efficient way to deal with these taxes.
Reside, have a domicile, a place of business, or property in the United States, or a municipality.
Have a source of regular income; and on the date the petition is filed owe less than $340,000 in unsecured debts and less than $1,020,000 in secured debts. Note: The amounts given here are 2009 amounts. They are regularly adjusted to keep up with the cost of living.

Corporations and partnerships may not file a Chapter 13 Bankruptcy Petition. If you filed a prior Bankruptcy Petition and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition.