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chapter 13 bankruptcy

Chapter 13 Bankruptcy is generally used for those who either earn too much to qualify for a Chapter 7, or have fallen behind on secured debts, such as their mortgage or car, and need the opportunity to catch up.  In a Chapter 13 case, you are placed on a payment plan ranging from 36-60 months to restructure your debt into a manageable plan which fits into your budget.  

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Once filed, an "Automatic Stay" is put in place, which stays, or in other-words prevents, all collection activity while the case is active.  If you are facing foreclosure, filing the case prior to the sale date will stop the foreclosure sale. Keep in mind, in Texas, foreclosures only take place on the first Tuesday of the month after the required notices have been properly delivered.

The benefit of Chapter 13 is that the plan allows you to catch up on past due secured payments, such as your mortgage or car note, over a period of 3 to 5 years.  Chapter 13 can also be used to pay past due taxes or domestic support obligations such as child support.  The arrears are placed into the plan and paid out over the length of the Bankruptcy case.  Spreading out the payments over a longer term allows you to catch up over time instead in a lump sum prior to a foreclosure.

In a Chapter 13 Bankruptcy, your unsecured creditors only get paid as part of the plan under certain circumstances based on various factors including your income and expenses.  After all plan payments are completed at the end of the case, the outstanding unsecured debt will be discharged and you will no longer be held personally liable for any remaining balance.

Chapter 13 can be more complex than a Chapter 7.  Hiring an attorney is beneficial in order to secure a favorable repayment plan that is in your best interest.  Throughout the course of the case, your plan payments may change.  An attorney can help ensure that any changes remain within your budget and your case proceeds smoothly. 

If you have questions about Chapter 13 Bankruptcy, contact us today for your free initial consultation.  During the consultation, we can provide our best estimate of your repayment plan and help determine whether the Chapter 13 will be in your best interest.

For more information on the Bankruptcy process, please see our Bankruptcy Basics section.


Updated on 4/13/2018