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Chapter 13 Bankruptcy

A chapter 13 bankruptcy is a way to reorganize payment of your debts; it involves creating a plan to pay all or a portion of the monies you owe. It can last for three to five years. A person usually files a chapter 13 because their income is too high to qualify for a chapter 7, they have too many assets that they cannot exempt, or they are behind on their mortgage payments.

A chapter 13 allows you to strip a second mortgage if it is completely unsecured. It may also allow you to save your home by curing mortgage arrears over the life of the plan. It can also eliminate divorce property settlement debts. Please note this does not include domestic support orders.

If the net value of your assets exceeds your exemptions, you can keep your assets by creating a chapter 13 plan that pays the amount that your assets exceed your exemptions.

A chapter 13 plan is a written proposal to the bankruptcy court that states:

  • How much money you will pay to the trustee
  • How long the plan will last
  • How much will be paid to each creditor
  • Other matters that are financially important

Priority debts like taxes, domestic support orders, and monies owed on fully secured debts must be paid in full. Usually you only have to pay a portion on the remaining unsecured debts. This amount is determined by your income after taking certain allowable deductions.

A chapter 13 will not eliminate:

  • Most taxes
  • Domestic support orders
  • Student loans (except in rare cases)
  • Secured loans (unless you surrender the collateral that secures the loan in the plan)
  • Secured debts whose last payment is due after the plan is completed
  • Injuries to persons or property that occur while driving under the influence
  • Fraud
  • Restitution orders

Our office is ready to answer your questions and we will help you determine if a chapter 13 bankruptcy is best for you.

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