Chapter 13 Overview
Are You Behind On Your Home Loan or Car Loan? Chapter 13 will allow you to repay your mortgage or loan payments that are behind over 3 years, and while you are in the Chapter 13 payment plan, the bank will not be allowed to foreclose on your property, and you can remain in the property so long as you follow through with your obligations in Chapter 13 plan.
Once Chapter 13 is filed, the bank will not be allowed to foreclose on the property, or repossess secured property like cars, unless they first obtain permission from Bankruptcy Court.
If you have sufficient income to repay the past due payments over the term of the Chapter 13 plan (in most instances 3 years), then the bank will not be allowed to foreclose or repossess the secured property.
Are You Eligible For Chapter 13?
The following is an initial test of whether or not you are eligible for Chapter 13:
Your secured debts are less than $1,081,400
Your unsecured debts are less than $360,475
You have regular source of income (from employment, self employment, social security, welfare, spousal or child support, or whatever source) see below
You must be current on Federal and State income Tax Filings
Only individuals are eligible, and businesses are not eligible to file Chapter 13
Chapter 13 & Income Requirement
In order to qualify for Chapter 13, you will have to show the bankruptcy court that you will have enough income, after subtracting certain allowed expenses and required payments on secured debts (such as a car loan or mortgage), to meet your repayment obligations. Your plan must pay back certain debts in full, or the judge will not confirm (approve) it and allow you to proceed. (For information on which debts have to be repaid in Chapter 13.
Chapter 13 Plan
Under a Chapter 13 plan, you make monthly payments, to the bankruptcy trustee, an official appointed by the bankruptcy court to oversee your case. The trustee in turn pays your creditors and collects a commission based on the amounts paid out under your plan. You must make every payment, on time, in order to successfully complete your plan and get a discharge of your remaining debts.
How Much You’ll Have to Pay
Some creditors are entitled to receive 100% of what you owe them, while others may receive a much smaller percentage (or nothing at all). Typically, Chapter 13 bankruptcy plans must provide that:
Priority debts will be paid 100%. These include:
• back alimony and child support
• most tax debts (including state and federal income taxes)
• wages, salaries, or commissions you owe to employees.
Mortgage or Other Secured Loan (For Example, Home Loans, Car Loans)defaults will be paid 100% if you want to keep your house or the car, unless you are able to strip your second or third home loan, or reduce the loan on a car to existing fair market value.
Unsecured debts will be paid anywhere from 0% to 100% of what you owe, depending on the total value of your nonexempt property, the amount of disposable income you have each month to put toward your debts, and, how long your plan lasts.
Length of Payment Plan
The length of your payment plan depends on your income level. If your “current monthly income” (your average income over the six months prior to filing) exceeds the median monthly income for a household of your size in your state, your plan must last five years. If your income is less than the median, you can propose a three-year plan, even if your unsecured creditors cannot be fully repaid during that time.
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