What Does Chapter 13 Mean?
Chapter 13 refers to a specific chapter of law concerning bankruptcy written by the the United States Congress (those boys in Washington, D.C.). These laws are different from the laws that most people know such as the laws requiring you to wear a seat belt or prohibit you from committing a crime.
Chapter 13 is a set of laws which apply to everyone in the country and it refers to a specific section (or chapter) within the bankruptcy code. There are 9 difference chapters in the Bankruptcy Code. Because these chapters are used by so many people, courts and the media routinely refer to a bankruptcy by the chapter number rather than providing a more descriptive explanation for which bankruptcy is being discussed.
Chapter 7 is what most people think of when they think of filing bankruptcy. Chapter 7 means someone filed for bankruptcy using the special rules and guidelines written under Chapter 7. Chapter 13 is the other type of bankruptcy people file, so what kind of rules does it have?
Differences Between Chapter 7 and 13
Let’s start with where they are the same: just like a Chapter 7, a Chapter 13 gives you immediate relief from debt. What about the differences? Let’s start with a big one. Chapter 13 can save your house from foreclosure. You can’t do that in a Chapter 7 case.
Most people will tell you that the difference between the two chapters is that in a chapter 7 bankruptcy, your case is over in a few months; where as, in a Chapter 13, you have to agree to a payment plan. Payment Plan? If you have an immediate negative reaction to the thought of having a payment plan, you aren’t alone! While payment plans are required in Chapter 13, it is misleading to describe payment plans as the sole difference between the Chapters.
Chapter 13 has some unique powers that you just can’t get in a Chapter 7 case. For example, in a Chapter 13 case, you can remove lien holders from the deed of your property as if you never borrowed the money before. In addition, you can force banks to reduce the payment of your car payment or reduce the total of what you owe. If you are keeping some of your secured assets such as a home or car, Chapter 13 can quickly make a ton of sense.
The Next Question People Wonder is How Much Would They Have to Pay?
How Much Would My Payment Plan Be?
Chapter 13 cases get a payment plan. The payment plan is an agreement which is approved and then mandated by the court. This plan allows you to gradually pay off your debts and avoid having your valuable assets sold in the process. Give you an exact number for your plan payment without knowing your specifics would be impossible. There are some rules of thumbs to keep in mind. Generally your plan payment will be at least the combined number of any secured asset you want to keep. It could also include other unsecured bill depending on the type of debts they are. There are generally two ways to calculate the minimum plan payment. The two methods you can use are the Schedule 22 and Schedule I & J method.
Can I Qualify For a Chapter 13?
There are limits to qualification based on a variety of factors, including the amount of debt. In order to qualify for Chapter 13, you must take a test according to 11 U.S.C 109(e). Also, one should have unsecured consumer debts less than $383,175 and secured consumer debts total $1,149,125. You’ll notice I italicized the word consumer. The reason is that these numbers have many exceptions, such as whether or not the debt is for a business. There are a number of other exceptions as well.
Think You Might Want to Learn More?
If you want to prevent foreclosure, protect your property, and maybe even reduce what you owe on your home or car, you should setup a consultation to speak with an attorney from our office. If you ready to get your life back on track, we are ready to help. Our attorney and staff will work with you to determine the best path to take toward a debt-free life. Contact Engel Law Firm by calling us at (214)377-0166 today and get the help and relief you deserve.