What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is also known as "reorganization" because a consumer will propose a repayment plan to pay back creditors over three to five years using a reliable source of income. If you are facing foreclosure, Chapter 13 is a much better remedy for catching up payments and keeping your home than Chapter 7.
- Repayment. When filing for a Chapter 13 bankruptcy, you must propose a repayment plan that details how you are going to pay back your debts over the next three to five years. In many cases, the interest rate can be greatly reduced, which helps make the debt repayment more manageable. The minimum amount you'll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you had filed for Chapter 7 bankruptcy.
- Debt limits. Your debts must be within limits set by the federal government: secured debt not to exceed $1,010, 650 and unsecured debt not to exceed $336,900.
- Secured debts. If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over time.
It is best to consult a bankruptcy attorney for advice on your specific situation. If you need help with finding an attorney, please contact us.