Chapter 13 Bankruptcy
Chapter 13 bankruptcy is basically a repayment plan for individual wage earners who have total unsecured debts of less than $307,675 and total secured debts of less than $922,975 (debts which are legitimately in dispute or are contingent are not included in this total).
Will I lose my assets by filing Chapter 13 Bankruptcy?
First, in a Chapter 13 case you will not lose any assets that you own. If you recall from my Chapter 7 article, in a Chapter 7 you have to give up any assets for which you do not have an exemption available. That is the trade-off for not having to repay anything to your creditors. In a Chapter 13, by contrast, as long as you are paying out to your creditors over the course of your Plan at least as much as they would get in a Chapter 7, then you will not lose any of your assets.
What are the time frames to file another bankruptcy after filing Chapter 13?
Second, by filing a Chapter 13, you maintain the ability to do another bankruptcy case sooner. Let me explain. If you file a Chapter 7 bankruptcy case and receive a discharge, you must wait another 8 years (from the date you filed your last case) in order to file another Chapter 7. If you file a Chapter 13 and get a discharge, you can file another Chapter 13 case at anytime (2 years if you need to get a discharge of debts in the next case) or a future Chapter 7 case after 6 years have passed.
Can I file for just one spouse in Chapter 13 Bankruptcy?
Third, if you are married, you can file Chapter 13 for just one spouse and the non-filing spouse will still be protected against creditor actions during the pendency of the bankruptcy case by what is called the “co-debtor Stay”.
Can I stop foreclosure by filing Chapter 13 Bankruptcy?
Fourth, you can use a Chapter 13 to stop a foreclosure sale (or vehicle repossession) and use the plan term (36 months) to catch up on the past due amounts to the secured creditors. In fact, you can do this even if you do not have funds left over to pay anything to your unsecured creditors!
Which debts can I discharge by filing Chapter 13 Bankruptcy?
Fifth, certain debts which are NOT dischargeable in a Chapter 7 case, may be discharged in a Chapter 13. These include debts incurred by willful and malicious injury to someone or someone’s property; money owed to a spouse as part of an “equalization payment”.
Those are just a few of the many advantages that Chapter 13 bankruptcy has over Chapter 7.
Chapter 13 Payment Plan Determination
That is rather complicated under the new bankruptcy laws. Essentially, you are supposed to pay all of your “disposable” (excess) income to the Trustee in your case for 36-60 months. How you determine your disposable income under the new laws will likely not be decided for years, but the basic guidelines are this: If your income for the 6 calendar months prior to filing your case exceeds the median income for your area and household size, then you take the average of that 6 months’ income and subtract certain IRS-based allowances for living expenses, vehicles, etc. Whatever number is left over is the amount of your plan payment. (whether it is for 36 or 60 months depends on other factors).
If your last 6 months’ income is BELOW the median income for your area, then you would presumably use your CURRENT monthly income and subtract from that your ACTUAL current expenses which are considered necessary (as determined by the Judge in your case).
Chapter 13 Bankruptcy Options
As I said, all of this is currently being hashed out on the legal battlefield. Congress was extremely inarticulate in drafting these provisions under the new bankruptcy laws, so a lot of this is a guessing game by lawyers (and judges, for that matter).
There are a lot more benefits to filing a Chapter 13 case, so you should always explore this option, even if you are eligible to file a Chapter 7 case. Discuss this with your bankrupcy lawyer.