Chapter 13 Debt
If you're considering filing for personal bankruptcy to help you eliminate your debt burden, you've probably wondered about what kinds of debt you may be able to eliminate in a Chapter 13 case.
While Chapter 13 cases typically allow more diverse debts than Chapter 7, there are still limitations on debt in Chapter 13 bankruptcy.
To speak with a bankruptcy lawyer right now about what debt relief options to expect from a Chapter 13 bankruptcy case, please fill out the form on this page and arrange a free, no-obligation with an attorney near you.
Secured Debt in Chapter 13 Bankruptcy
Chapter 13 bankruptcy is sometimes called "reorganization" bankruptcy because it allows filers to reshuffle their finances in order to catch up on past-due debts while staying current on other debts. This is possible thanks to the three- to five-year repayment plan Chapter 13 filers commit to.
Here's a look at what you can expect in terms of secured debt in Chapter 13 bankruptcy.
- There's a limit: Your secured debts (that is, debts connected to property) cannot exceed $1,081,400 if you want to file for Chapter 13 bankruptcy. This limit is set by the federal government and changes according to cost of living estimates every few years. Luckily, most people interested in Chapter 13 protection fall within the limit.
- You may be able to keep your house: One reason many people file for Chapter 13 is to halt or postpone mortgage foreclosure. While the bankruptcy court does not have the authority to rewrite the terms of your mortgage, it does offer the protection of the automatic stay, which typically prevents foreclosure (and other collection actions) for the duration of your case. Many people are able to get current on their mortgage payments or make alternate living arrangements while under the protection of the bankruptcy court.
- You may be able to keep your car: Similarly, Chapter 13 generally lets filers hang on to their cars (a big plus, as many filers need their vehicles to get to and from their jobs). In some cases, the court is even able to eliminate some of the debt filers owe on car loans in what’s called a "cram down." In these cases, filers end up paying their car's current market value, rather than the total amount of their debt.
Unsecured Debt in Chapter 13 Bankruptcy
Here's what to expect from your unsecured debts (that is, debts not connected to any property):
- There is a limit: As with secured debt, your unsecured debt must fall within a certain limit (currently $360,475) in order to qualify for Chapter 13 bankruptcy.
- Some repayments: While secured debts are given priority in the repayment plan, in most cases, filers are expected to pay back at least some of what they owe to unsecured creditors (including credit card companies, medical service providers and the like).
- Some discharge: The good news is that, if you make all your payments on your repayment plan as scheduled, the court may discharge any leftover unsecured debts at the end of your repayment period.
Learn More from a Bankruptcy Lawyer
If you'd like to learn more about Chapter 13 debt and how your case might proceed, take this opportunity to connect with a bankruptcy lawyer near you.