Chapter 13, Chapter 11 and Chapter 7 are the types of bankruptcy that may be available to you if you are struggling financially. When you have what seems to be an insurmountable amount of debt, you might look at bankruptcy as an option.

While each type has its pros and cons, learn more about Chapter 13 bankruptcy and if it is the right option for you.

 What Is Chapter 13 Bankruptcy?

Called the “wage earner’s plan,” Chapter 13 bankruptcy requires filers to have a regular income. Instead of having all of your debt forgiven, this type of bankruptcy requires you to restructure and repay your debt within three to five years.

Who Is Eligible for Chapter 13 Bankruptcy?

First of all, it’s important to know who is eligible for Chapter 13.

At the most basic level, anyone who makes a regular income can file for Chapter 13 if their debt is under the threshold. Unsecured debt (like from credit cards and personal loans) cannot exceed $394,725, and secured debt (like your mortgage) cannot exceed $1,184,200. Your income will determine the timeline for repaying your debts.

Some other items you must adhere to include:

  • You can provide updated tax returns and payments.
  • You have not had a bankruptcy dismissed within 180 days for a failure to comply with the court.
  • You have not received a discharge from a Chapter 13 bankruptcy within the previous two years, or a Chapter 7, Chapter 11, and Chapter 12 bankruptcy within the previous four years.

  What Happens to Your Debts in Chapter 13 Bankruptcy?

When you file Chapter 13 bankruptcy, you will need to set up a repayment plan for your debts.

Your debtors can set up their repayment plans, as long as it is approved by the court. Your payments will be paid to a trustee, and they will be included in a court-approved plan. This official plan will include:

  • Who your court-appointed trustee is and how much you will pay that person each month.
  • How you will get the payments to the trustee.
  • How long your repayment plan will last.

The timeline of when your debts need to be repaid and which ones you might be able to have forgiven can depend on the type of debt:

  • Priority debt: These must be paid in full. These can include any tax debt you owe, as well as child support or student loans.
  • Secured debt: These debts will be paid over time. This can include your mortgage loan.
  • Unsecured debt: These balances may be reduced, or even forgiven after your repayment plan is complete. This type of debt can include your credit card balances.

Benefits of Filing Chapter 13 Bankruptcy

Filing Chapter 13 bankruptcy can provide many benefits. Some of the advantages can include:

  • You can keep your house: If you are behind on your mortgage payments, Chapter 13 bankruptcy allows you to pay off your debt over time through payment installments. This helps you avoid foreclosure.
  • You can consolidate your debts: You submit one payment each month to your trustee, and that person pays your debtors. These repayments will be negotiated, and your payments may be lowered.
  • You can protect your credit: A Chapter 13 bankruptcy will stay on your credit report for seven years. Under other types of bankruptcy, like Chapter 7, the bankruptcy may stay on your record for up to 10 years.

Contact an Attorney

To learn more about Chapter 13 bankruptcy and whether it is the right option for you, it’s crucial to hire an experienced attorney to help you through the process. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.


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