Chapter 13 is a form of bankruptcy available only to individuals and couples. Through this type of bankruptcy, you work out a restructuring plan and then repay debts through a trustee, sometimes at a discount.
The upside of Chapter 13 is that you get to keep all of your property. Filing this kind of bankruptcy generally works best for people who have a steady and reliable stream of income to ensure they can meet their new set of obligations. You keep all of your property and pay back some or all of your debt in a three to five year period to a bankruptcy trustee who then pays your creditors.
Paying taxes, alimony and child support are considered priority debts in a Chapter 13 filing, and must be repaid in full as part of your plan. Instead of repaying car loans and mortgages, you may be able to surrender your property and you will no longer be liable for paying on them anymore.
You must be qualified to file a Chapter 13 bankruptcy. Some of the requirements include:
- If you are a business owner, you can file for Chapter 13, but only your personal debts can be discharged. Your business debts will remain separate.
- You must be able to show a regular stream of income and that you can make regular payments to the Chapter 13 trustee handling your bankruptcy. If you can’t show regular income, your Chapter 13 plan will probably not be approved.
- Unsecured debts, such as credit card debt, loans, taxes and medical bills have a cap on them. They cannot exceed $383,175. Many times, debtors will only require a partial repayment of this kind of debt. Amounts and percentages will vary based on your personal situation.
- Secured debts, such as car and mortgage payments also have a ceiling. Combined, they cannot exceed $1,149,525.
- If you are a stocks or commodities broker, you are not allowed to file Chapter 13 bankruptcy under any circumstances.
Faletti Law Office focuses on family law, tax law, bankruptcy and estate planning for clients in Bloomfield and the surrounding Colorado communities of Arvada, Westminster, Northglenn, Commerce City, Erie, Brighton, Lafayette, Longmont, Firestone, Thornton, Adams County, Jefferson County and beyond.