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Frequently Asked Questions About Chapter 13 Bankruptcy


The vast majority of bankruptcy filings by individuals take place under chapter 7 or chapter 13 of the bankruptcy code.  The shorthand descriptions of the differences between these two types of bankruptcy filing commonly used in the media do not tell you all the details about how the case will go if you file.  You probably know that in chapter 7, the bankruptcy court liquidates your non-exempt assets, and in chapter 13, there is a repayment plan instead of liquidation, for example.  If you are thinking about filing for bankruptcy protection and want to find out more about whether a chapter 13 filing is right for you, contact a Miami chapter 13 bankruptcy lawyer.

Who Is Eligible to File for Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is sometimes called the wage earner’s bankruptcy filing.  In other words, it is designed for people who have a steady income, whether from employment or a steady stream of freelance work.  You are eligible for chapter 13 bankruptcy if you have a regular source of income, but your income is less than $2.75 million per year.  In other words, as long as you have a job, whether you are a cashier or a C suite executive, you can file for chapter 13 bankruptcy.  If your income is below a certain threshold, your chapter 13 repayment plan will be for three years, but if it is above this threshold, it will be for five years.

If you do not have employment income because of age, disability, or repeated unsuccessful efforts to reenter the workforce, chapter 13 bankruptcy is not for you.  In this case, you should file for chapter 7 bankruptcy protection.

What Determines the Amount of Your Payment Plan?

The court determines your payment plan based on its assessment of how much you can afford to pay.  In other words, it looks at your income, subtracts your essential expenses, and requires you to pay a portion of what is left.  As for who gets the money when you make payments to the bankruptcy court, the court gives creditors a chance to file a claim, and then it ranks them in order of priority.

What Happens to Your Home Mortgage During Chapter 13 Bankruptcy?

If you have a home mortgage, you may still be able to keep your home after a chapter 13 bankruptcy case.  You must continue to make your mortgage payments as scheduled.  If you have fallen behind, the arrearage becomes one of the debts included in the payment plan.  Therefore, chapter 13 bankruptcy is a popular option for homeowners who are in danger of foreclosure.

What Happens to Your Car Loan During Chapter 13 Bankruptcy?

If you have an outstanding balance on a car loan, the bankruptcy court can include it in the repayment plan.  The amount you pay over the term of the payment plan may be more than the car’s current resale value if the car’s value has depreciated.

Work With a Debt Lawyer About Chapter 13 Bankruptcy

A South Florida debt lawyer can help you keep your house and car during and after a chapter 13 bankruptcy case.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.




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