In a Chapter 13 case, we help you file a "plan" showing how you will pay off some of your past due and current debts over the next three to five years. A Chapter 13 case is important because it allows you to keep valuable property—especially your home and vehicle—which might otherwise be lost, as long as you can make the plan payments. In many ways, Chapter 13 may function as a bill consolidation of secured debts.
Qualifying for Chapter 13 Bankruptcy
You should consider filing a Chapter 13 plan if you:
- Are behind on house or vehicle payments, but can catch up if given time;
- Own property which is not exempt, but you can afford to pay creditors over time; or
- Have the desire to pay what you can afford, without the phone calls from creditors.
During the Chapter 13 plan you will need to have enough income to pay for your necessities and to keep up with the required payments as they come due. Debtors will generally be able to keep their home or vehicle, as long as the payments in the plan for the property reasonable and affordable. There are situations where there's so much equity in the property that it cannot be entirely exempt. In such cases, debtors may need to be willing and able to pay a large dividend to unsecured creditors. In addition, if you have the means to pay your unsecured creditors then this could require your plan to pay back general unsecured debts. This area of law requires that you have a good attorney to advise you how to comply with and maximize the benefits available under Chapter 13.
Chapter 13 Bankruptcy Can Allow You to Keep Vital Property and Assets
There are several ways that you can keep mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. You can often pay the secured debt in the plan and pay at a lower interest rate over a period of 3 to 5 years. For some of the older secured debts, you only are required to pay the value of your property. This is commonly called the “cram-down.” Some of the debt that you placed household items up for collateral in order to secure a non-purchase money debt can be paid as if there were no collateral, which could lower your payments further. These are legal methods that often allow folks to realistically keep what they have and pay what they can afford over time.
Chapter 13 has become an effective way for many Texans to reorganize their financial affairs, while keeping all their property needed to sustain their household, livelihood, and dignity. In making the decision whether to file bankruptcy, one should always consider the powerful provisions available under Chapter 13, and you should get the advice from a qualified, experienced attorney.