Chapter 13

Chapter 13 is the “wage earner” bankruptcy. Chapter 13 bankruptcy is also available to small unincorporated businesses owned and operated by individuals. A corporation or LLC is not an individual. If you have regular income and a desire to pay your debts, (or a portion of them) but currently are unable to do so, you may be able to propose and carry out a chapter 13 repayment plan under which creditors are paid over an extended period of time under bankruptcy court supervision and protection. It is possible that you could have a five year period to adjust your debts in this way while creditors are prohibited from starting or continuing collection efforts. Most chapter 13 cases are used to help catch up on house payments that are owed at the date of the case filing and also restructure car payments. Also Chapter 13 is very useful if real estate or income taxes are owed and you can pay them if spread out over 5 years.

Any individual is eligible for Chapter 13 relief as long as the individual’s unsecured debts and secured debts are less than certain amounts.

Chapter 13 is a provision of the Bankruptcy Code that allows an individual (not a corporation or partnership) to restructure his or her debts.  It allows the debtor to pay all or part of its debts over time.  This chapter is available to an individual with a “regu­lar” income.  The debt limits have just been raised to $2.75 million regardless of whether the majority of debt is tax, school loans, business loans etc. There is no longer a lower debt limit for unsecured debt.

Under Chapter 13, the debtor(“you”) proposes a Plan by which he or she will make monthly payments to a Standing Chapter 13 Trustee for 36 to 60 months (3 to 5 years).  The Trustee will then distribute the funds to the creditors according to the Plan.  The Trustee will receive a “commission” of no more than ten percent (10%) of the payments to creditors.  That is how the Trustee runs the chapter 13 office. Under the Plan, you may not have to pay all the creditors in full.  But, you must propose the Plan in “good faith.”  Also, the creditors must receive at least as much as they would receive if you had liquidated in Chapter 7.  In addition, if anybody objects, the Court cannot confirm it unless you are paying all your “projected disposable income” to the plan. We will discuss that in great detail.

Contact me to determine if this chapter is right for you. 214-522-3669 or