Personal Reorganization for Financial Freedom
Good afternoon, this is Edward Kelley, your OKC bankruptcy lawyer with another three minutes to financial freedom. Yesterday we talked about what is a Chapter 7, today we’re going to talk about what is a Chapter 13.
If you’ll recall, a Chapter 7 is what they call a liquidation bankruptcy. That’s basically where you’re going to liquidate or give up or turn into payment all of your non-protected or non-exempt assets. In exchange, the court is going to wipe out, aka discharge, all of your dischargeable debt. That’ll include most debts other than student loans backed by the government, child support, court fines, and also if there’s collateral tied to loans that’s been properly recorded as a lien, then that collateral has to be given up in order to discharge that loan.
Chapter 13, however, is called a personal reorganization. You can think of it as if your personal financial life is a business and you’re going to reorganize it with the help and the authority of the court. Rather than discharge all of your debts, you’re going to pay a percentage, which might be very small and which might be 100%, of those debts over the course of three to five years.
Why File Chapter 13?
One of the reasons someone would do a Chapter 13 is because they’re going to lose their home or their vehicle. Chapter 13 has extraordinary powers to force a creditor to allow you to pay off a loan that is secured by collateral and keep the collateral even though you are behind. For example, if your house is in foreclosure or your car is about to be repossessed, through a 13, provided that you provide a reasonable and adequate plan to pay off the creditor over time, you can force them to extend the length of the loan and to give you time to pay it off and keep the collateral, even when all state court remedies have been exhausted. That’s the reason a lot of people do it.
The other main reason is because people make too much money. Chapter 7s have income requirements, $55,000 for a household of one and add about $10,000 on top of that for each additional. If you make significantly more than that, then you’re not able to do a 7 and your only recourse is to do a 13. Of course, if your disposable income is only a little bit over, then your 13 may only pay a small percentage of your creditors. At the end of the three to five years, generally five years, any remaining debt is discharged. You might pay only 10% of $100,000 in debt, for example, $10,000, over the course of five years and then $90,000 is discharged, still a pretty good deal.
Contact Our Bankruptcy Attorney for a Free Consultation
That’s the basics of 13. It’s a personal reorganization versus a liquidation, and it allows you to save your home, keep your car, even if you’re seriously behind on either one, and it’s what you do if you make too much to do a Chapter 7. That’s going to do it for today’s 3 Minutes to Financial Freedom. As always, you can reach me, a chapter 13 attorney in Oklahoma, at oklahomacitybankruptcyattorney.pro.