Chapter 13 Bankruptcy
Individuals whose steady income is high enough to make them ineligible for Chapter 7 bankruptcy may file, instead, for Chapter 13 bankruptcy. This form of bankruptcy allows people in need to restructure their debts.
Filing for Chapter 13 bankruptcy, like filing for the Chapter 7 version, automatically “stays” or stops any attempt by creditors to pursue actions such as lawsuits, foreclosures, or other attempts at collection. However, unlike in Chapter 7 proceedings, the property involved in a Chapter 13 bankruptcy is not sold and turned into cash, to be distributed to creditors.
Rather, a person filing for Chapter 13 bankruptcy submits to the bankruptcy court a proposed plan for repaying debts (in full, in part, or not at all, depending on a variety of factors), over a period of generally 3-5 years. If the court approves the plan, it then appoints a trustee to oversee the repayments. If the initial plan is not approved, the petitioner may file a modified plan, or request a conversion to a Chapter 7 bankruptcy.
In Chapter 13 bankruptcies, the creditors may not object to the ultimate discharge of the debts, but they can object to the approved repayment plan.
In filing for any type of bankruptcy, a debtor must comply with a number of procedural requirements—including the provision of complete information about his or her assets and debts; the submission of relevant tax documents; and the completion of a court-approved course on managing personal finances.
More debts may be addressed through Chapter 13 bankruptcy than through Chapter 7; however, in Chapter 13 cases the debts are not discharged until the repayment plan is completed. Throughout the duration of the repayment plan, the person pursuing the discharge of his or her debts continues to be protected from any additional action by creditors.
For a free consultation regarding various bankruptcy options, please contact our office at 408-292-4849; we would be glad to help you determine the best path to a fresh financial start.