We’re here to get your questions about Chapter 13 bankruptcy answered. If you’re earning a regular income but are over your head in credit card debt or medical bills, Chapter 13 bankruptcy could give you the fresh start you need. It’s important to consult a bankruptcy lawyer to determine whether Chapter 13 is the right fit for your situation. The bankruptcy laws are complex, and searching online or trying to file your own petition could have serious consequences. Talk to a lawyer who can evaluate your individual situation and help you seek the best debt-relief solutions.
What Is Chapter 13 Bankruptcy?
Bankruptcy comes in several different forms depending on who is filing, their assets and debts, and the relief they are seeking from the legal process. Filing a bankruptcy petition under Chapter 13 of the bankruptcy laws seeks reorganization of your finances to get a fresh start. In contrast, Chapter 7 bankruptcy seeks the discharge of some of your debts to wipe the slate clean.
Reorganization means that the court will assess your income, assets, and debts, coming up with a payment plan that combines payments on most of your debt. Typically, the only exception is your mortgage, which is paid directly to the mortgage lender. As you make the monthly payments, the money is distributed among your creditors. At the end of the payment plan, some or all of your creditors will receive full or partial payment on your debts. Any remaining debt will be discharged (cancelled) except for non-dischargeable debt such as student loans. Most of the time, you will pay back less using the monthly payment plan than you would have without filing for bankruptcy.
Why File for Chapter 13 Bankruptcy Instead of Chapter 7?
Many clients wonder why filing for Chapter 13 bankruptcy is a better choice for them than filing Chapter 7. There are several common reasons. For example, some people have to file for Chapter 13 because they make too much money to qualify for Chapter 7. The bankruptcy laws contain what’s known as a “means test” to determine whether a debtor can file for Chapter 7 or not. The means test involves calculating your average income over the six months preceding your bankruptcy filing, compared to your state’s median income and household size. If you fail the means test, some exceptions could allow Chapter 7 filing anyway. But if you simply make too much regular income to qualify for Chapter 7, Chapter 13 is one of your options.
Another reason to file for Chapter 13 is to retain assets. In the course of a Chapter 7 bankruptcy, some debtors are required to surrender secured assets, such as homes or vehicles, because they cannot afford to make the payments. The Chapter 7 process focuses on discharging unsecured debt, such as credit cards or medical bills, rather than retaining valuable assets. However, many debtors want or need to retain certain assets. Chapter 13’s reorganization process can allow for the retention of assets for debtors who qualify to file under the chapter’s laws.
The reasons for choosing Chapter 13 bankruptcy over Chapter 7 or other available debt-relief options can be complex. That’s why we urge you to speak with an experienced Oregon bankruptcy lawyer to plan your path forward.
Frequently Asked Questions
Why is it called “Chapter 13” bankruptcy?
The set of federal laws that make up the bankruptcy code has several chapters describing different types of bankruptcy. For example, some chapters describe bankruptcy processes only available to businesses. Chapters 7 and 13 of the code describe two common types of bankruptcy available to individuals.
What’s the difference between liquidation and reorganization?
Liquidation, available under Chapter 7, involves discharging many unsecured debts such as credit card debt. Discharge means the debts no longer exist and the slate is wiped clean for the debtor. Reorganization, available under Chapter 13, involves a monthly payment plan to repay some or all of the debts, at least in part. Chapter 13 makes sense for people who have steady incomes but don’t have a plan in place to repay significant debt.
How long does Chapter 13 bankruptcy take?
It depends on the length of the payment plan, but typically 3 to 5 years. Most Chapter 13 filers have significant debt, so it can take a while to complete a payment plan that repays some or all of their creditors. Although it takes time, this payment plan is worth it for many people because it allows them to regain control of their finances.
Reach Out to a Chapter 13 Bankruptcy Attorney to Learn More
Interested in starting fresh by filing for Chapter 13 bankruptcy? Contact our firm for legal advice about Chapter 13, other kinds of bankruptcy, and non-bankruptcy debt relief options. We offer free and confidential consultations in Beaverton, Oregon. Talk with a Chapter 13 bankruptcy attorney at the Law Offices of Alexzander C.J. Adams, P.C. by calling us at 503-278-5400 or toll-free at 888-560-8146, or completing our online contact form. We look forward to hearing from you!
