Chapter 13 Bankruptcy
Reorganization Bankruptcy

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, called the reorganization bankruptcy, is very different from Chapter 7 bankruptcy (which wipes out most of your debts). In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over a period of time. Most Chapter 13 bankruptcies last three years. Some last longer a court can approve a case as long as five years. A few are shorter if you pay off 100% of your debts in less than three years, your case will be over sooner.

Chapter 13 bankruptcy isn't for everyone. If your income is too low or irregular, you may not be eligible. To file for Chapter 13, bankruptcy, you must have a steady income.

If your total debt burden is too high, you are also ineligible. Your secured debts cannot exceed $922,975, and your unsecured debts cannot be more than $307,675. A secured debt is one that gives a creditor the right to take a specific item of property (such as your house or car) if you don't pay the debt. An unsecured debt doesn't give the creditor this right. Examples of unsecured debts are credit card and medical bills.

Chapter 13 Bankruptcy Repayment Plan

This form is the most important paper in your entire Chapter 13 bankruptcy case. It describes in detail how (and how much) you will repay on every one of your debts. There is no official form for the plan, but many courts have designed their own forms.

Chapter 13 Bankruptcy
How Much You Must Pay

Usually, you will make reduced payments on your unsecured debts, and the regular payments for any secured debts. The exact "reduced" amount you must pay unsecured creditors is based on many calculations.

Most repayment plans last three years. After that, any remaining unpaid balance on the unsecured debts is discharged, unless the debt is not dischargeable by law. In some cases, the court will approve a plan in excess of three years, up to five years.

New Bankruptcy Bill

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