Chapter 13 Bankruptcy Information
There are two main reasons that most of my clients file a Chapter 13 Bankruptcy:
First, if your median household income is too high to pass the Chapter 7 Means Test, you may still be able to get a partial discharge of some of your unsecured debts by filing a Chapter 13 bankruptcy case. Depending on your individual situation, the entitlement of a partial discharge of your unsecured debts, which includes credit card bills, personal loans and medical bills.
A Chapter 13 Bankruptcy is a repayment plan over a maximum of five years. However, you may not have to pay back all of the unsecured debt. How much of the unsecured debt you will pay depends on your income and the value of other property you own.
Another reason is: you may be behind on payments on secured loans such as a car loan or a home loan. A secured loan means that the creditor can take your property if you fall behind on payments. For example, let’s say you have missed a few car payments. If you want to keep the car, do NOT file a Chapter 7 case; you need to file a Chapter 13 case or you will lose the car. If you signed the loan agreement more than 2.5 years (actually, 910 days) before filing the bankruptcy case, you may be able to “cram down” the amount that you will pay in the Chapter 13 case down to the current value of the vehicle.
Behind on Mortgage Payments
As another example, you might be behind on mortgage payments for your home loan. If you wish to keep the house, you will need to file a Chapter 13 case. If you need a loan modification, filing a Chapter 13 case may be your best bet to set up conditions which will result in getting the lender to accept a lower monthly payment, or alternatively helping you to catch up on any arrearage while making regular payments going forward. You should not file a Chapter 7 Bankruptcy if you are behind on house payments as this will result in the lender seeking permission from the Bankruptcy Court to foreclose on your house.
A third reason you might want to file a Chapter 13 Bankruptcy as opposed to a Chapter 7 Bankruptcy is if you have property that you cannot fit into exemptions, and you would be better off paying a portion of your unsecured debts so you can keep the nonexempt property. How much of the unsecured debt you must pay would depend on the value of the nonexempt property.
There are other situations in which filing a Chapter 13 Bankruptcy is advantageous for a consumer or business debtor, including needing a payment plan to pay old tax debts, or domestic support obligations.
It is highly recommended by the Bankruptcy Court and the Chapter 13 Trustee that you hire a lawyer experienced in Denver bankruptcy law and Chapter 13 to represent you for the filing and maintenance of a Chapter 13 case.