Chapter 13
Debt Reorganization Through Payment Plan
Chapter 13 bankruptcy, often called 'reorganization bankruptcy,' allows individuals with regular income to develop a plan to repay all or part of their debts over 3 to 5 years. Unlike Chapter 7, this option enables you to keep your property while restructuring your debts into an affordable monthly payment plan. The plan lets you catch up on missed payments for secured debts like mortgages while potentially reducing unsecured debt obligations. Chapter 13 stays on your credit report for 7 years from filing but provides comprehensive debt relief while protecting assets.
Pros
- Keep all property and assets
- Stop foreclosure and repossession
- Catch up on missed payments
- Consolidate all debts into one payment
- May reduce unsecured debt amounts
- Protect co-signers
- Include tax debts and child support arrears
Cons
- 3-5 year commitment to payment plan
- Must have regular income
- Limited debt amounts ($419,275 unsecured, $1,257,850 secured)
- Credit impact for 7 years
- More expensive than Chapter 7
- Must pay disposable income to creditors
- Cannot file new bankruptcy during plan
Qualifications
Must have reliable, regular income sufficient to make plan payments after reasonable expenses.
Unsecured debts must be less than $419,275 and secured debts less than $1,257,850 (adjusted periodically).
Must be current on tax filings for the past four years.
Cannot file if previous Chapter 13 was discharged within 2 years or Chapter 7 within 4 years.
Must complete approved credit counseling within 180 days before filing.
The Process
- 1Complete Credit Counseling
- 2Develop Repayment Plan
- 3File Bankruptcy Petition
- 4Attend 341 Meeting
- 5Confirmation Hearing
- 6Complete Payment Plan
- 7Receive Discharge
Timeline
3-5 Years
