What is a Chapter 13 Bankruptcy?

The Bankruptcy Code allows two types of bankruptcies for individuals.  One is Chapter 7, also known as a liquidation bankruptcy.  The other is Chapter 13.  There are important differences between these two chapters.

Chapter 13 is also known as a wage earner’s plan.  This plan is for people who have a regular income, and want to keep a house, car, or other property, and continue making payments.  It is also for people who do not qualify for a Chapter 7 plan, because their income is too high. 

If you are behind on house or car payments, income taxes, child support, or other debts, Chapter 13 will help you make up missed payments.  It may also help you lower your payments or get rid of some payments completely. 

Your attorney will help you come up with a plan to pay your creditors.  Your income and expenses will be evaluated to see if you have enough disposable income to make reasonable payments to your creditors.  This includes creditors for all kinds of things – your mortgage, credit cards, medical bills, and car.   A court must approve of this plan.

Your case will be handled by a Trustee, who will see to it that you follow your plan and make sure your payments are applied to your creditors.  You must make your regular monthly payments on time, or your case may be dismissed. 

Depending on the amount of debt you have, and your income, a plan will be made for either a three year or five year term.  If you carefully follow your plan and make all your required payments, then at the end of the plan, you will receive a discharge.  A discharge means that your debts are have been paid as promised and that you are no longer responsible for them.  This is true even if you do not pay all of the debt that you initially owed.

Some debts can never be discharged.  These include taxes, child support and alimony, student loans, and damages resulting from a DWI conviction.  You should speak with an attorney to determine how to deal with these debts.  Some can be paid back during the course of your bankruptcy.

Don’t go into the bankruptcy process alone.  Let a caring, experienced bankruptcy attorney help you.  Call the Law Office of Rebecca Darchuk at (828) 505-1052, or email her at darchuklaw@gmail.com for a free consultation.