Chapter 13 Bankruptcy: Debt Reorganization

Financial plan

Set Up A Three- To Five-Year Debt Repayment Plan That Works For You

Chapter 13 bankruptcy is a court-supervised debt adjustment procedure. This debt relief option is available to individuals with regular income who have unsecured debts totaling less than $383,175 and secured debts totaling less than $1,149,525.

The Chapter 13 debtor files a bankruptcy petition that is virtually identical to the Chapter 7 petition, including a detailed financial statement and listing of assets and liabilities.

The filing fee for the court is $310. In addition, the debtor typically pays his attorney some portion of the total agreed-upon fee in advance.

The Chapter 13 debtor files a plan that provides for repayment of debts over a three- to five-year period. The plan is usually a five-page form. The court appoints a Chapter 13 trustee, whose job it is to receive payments from the debtor and disburse funds to creditors.

The Chapter 13 trustee acts as a disbursing agent, not as a liquidating trustee. The debtor remains in possession of all of his or her property, both exempt and nonexempt.
Upon completion of payments under the plan, the debtor typically receives a discharge of remaining debts, even if he or she has paid less than 100 percent of the debt. There may be some exceptions.

The first payment under the plan is due 30 days from the date the plan was filed.

Personally Designed Plans Make Repayment Achievable

Most Chapter 13 plans provide for only a partial repayment of debt.

To be approved by the court, the debtor's plan must provide for the debtor to pay to the Chapter 13 trustee a sum equal to the debtor's disposable income for at least 36 months. This figure takes into account the debtor's regular monthly living expenses.

The plan must pay creditors at least as much as what those creditors would receive if the case were in Chapter 7. Thus, the amount that will be repaid to creditors is dependent upon the debtor's income and assets. The debtor's plan needs to be filed in good faith, with no attempt to hide debts or assets.

Is Chapter 13 bankruptcy the most appropriate debt relief option in your case? Discuss your financial circumstances with a lawyer at The Law Offices of Jonathan Stone in Hackettstown, New Jersey. Call or email today to request a free consultation.