Is Chapter 13 Bankruptcy Right For You?

Chapter 13 bankruptcy is a debt-restructuring plan in which you create a plan that specifies how you are going to repay your creditors. This is in contrast to Chapter 7 bankruptcy, under which you can receive a complete discharge of your debt, but you may lose non-exempt assets in the process.

Basically, Chapter 13 bankruptcy allows you to keep your property and repay all or a portion of your debt over a specified period of time, typically three to five years. You make a single payment each month to the bankruptcy trustee, who will disburse these funds to your creditors for you.

Here are some of the reasons why Chapter 13 bankruptcy may be right for you:

You Are Not Eligible For Chapter 7 Bankruptcy.

1. Chapter 13 bankruptcy may be right for you if you are not eligible to file Chapter 7. You will not be eligible to file Chapter 7 bankruptcy if: your monthly income in the last 6 months before filing for bankruptcy was greater than the median household income in the state; or, your adjusted disposable income exceeds the legal limit for filing chapter 7 bankruptcy.

You Are Behind in Your Payments and Want to Keep Your Home.

2. Chapter 13 may be right for you if you are behind on your mortgage and want to keep your home. Past due mortgage payments and any late fees will be added to your chapter 13 debt repayment plan, and you will be able to cure your default by making regular payments to your bankruptcy trustee, who will disperse these funds directly to the lender. Your lender will be required to accept these payments and will not be able to foreclose on your home as long as you are in compliance with your debt-restructuring plan.

3. Chapter 13 may be right for you if you have a second or third mortgage on your home. With a Chapter 13 bankruptcy, it may be possible under certain circumstances to obtain a court order to void these liens. If you obtain such an order, you will no longer be legally obligated to repay the debt on a second or third mortgage, and, at the end of your repayment plan, the debt will be discharged and there will no longer be a lien on your property.

4. Chapter 13 may be right for you if you have a Home Owners Association loan and you are behind on the payment. Like with your mortgage payments, past due HMA payments will be added to your reorganization plan and the default will be cured through your payments to the trustee.

You Are Behind on Your Payments and Want to Keep Your Car.

5. Chapter 13 bankruptcy may be right for you if you have an auto loan and you are behind on the payments. Chapter 13 will allow you to maintain possession of the vehicle even if you are behind on your payments when you file. You will no longer be required to make payments to the lender. Instead, the trustee will pay off the vehicle from the payment you send him every month, according to your repayment plan. At the end of the plan, you will own the vehicle free and clear.

6. Chapter 13 may be right for you if the lender has repossessed your car, but has not sold the vehicle yet. If you file chapter 13 in time, it may be possible to obtain an order from the court to have your vehicle returned to you. If the lender does not voluntarily return the vehicle to you when you file for Chapter 13 bankruptcy, your attorney may be able to argue that the vehicle is necessary for your reorganization and obtain an order requiring the lender to return your car to you.

7. Chapter 13 may be right for you if you owe money to the IRS or State Department. If you owe priority tax debts to the IRS or State Department, these debts will be added to your debt payment plan and paid off by the trustee with the monthly payments you send him in accordance with your debt reorganization plan. As long as there has been no lien filed, these debts will be paid back with no future interest or penalties.

8. Chapter 13 bankruptcy may be right for you if you want to file bankruptcy and keep your non-exempt assets. Under Chapter 7 bankruptcy, your non-exempt assets will be liquidated to repay your creditors. However, under Chapter 13 bankruptcy, you will be able to retain these non-exempt assets as long as you are not trying to hide disposable income and you are in compliance with the reconciliation requirements.

Free Chapter 13 Bankruptcy Consultation

For a free consultation with one of our bankruptcy lawyers in Oklahoma City, call (888) Debt-Line or (405) 563-7888 today. Our attorneys have years of experience in Oklahoma bankruptcy law and in applying Oklahoma bankruptcy exemptions, so that Debt Line Law Office clients can keep their exempt property (home, car, 401k, et cetera) and still discharge unsecured debts (credit cards, medical bills, repossession deficiencies, et cetera) through a Chapter 7 bankruptcy or Chapter 13 bankruptcy in Oklahoma. With a ten (10) minute, free phone consultation with one of Debt Line’s Oklahoma City bankruptcy lawyers, you can know what you qualify for and the costs and procedures involved.