What is a “Chapter 13” Bankruptcy?
Under a Chapter 13 bankruptcy, a debtor proposes a three to five year plan for paying back creditors, either offering to pay off all or part of the debts from the debtor’s future income. Chapter 13 can at times be used to prevent a home foreclosure; make up missed car or mortgage payments; pay back taxes; stop interest from accruing on your tax debt (local, Minnesota state, or federal); keep valuable non-exempt property (see Minnesota exemptions); and more.
To facilitate the intake process, we provide intake forms to facilitate the process of filing for bankruptcy protection.
The first step in filing for bankruptcy in Minnesota is to meet with Lauri Ann Schmid, our bankruptcy attorney, for a free consultation. During the consultation, Lauri will review your intake form, examine your assets, assist with a budget and review your debts. After the review, Lauri will have the background information necessary to give you proper legal direction for your debt relief.
How Does a Chapter 13 Bankruptcy Work?
If you can stick to the terms of your repayment agreement, all your remaining dischargeable debt will be released at the end of the plan (typically three to five years). The amount to be repaid is determined by several factors including the debtor’s disposable income as is usually determined as part of the Minnesota Means Test. In addition, the total amount paid to creditors under the Chapter 13 plan must also be at least as much as creditors would have received if the debtor filed a Chapter 7 bankruptcy.
Qualifying for Chapter 13
In order to file Chapter 13 bankruptcy you must have a “regular source of income” and have some disposable income to apply towards a Chapter 13 payment plan.
Considerations for Chapter 13 Filings
Chapter 13 bankruptcy is generally used by debtors who want to keep secured assets, such as a home or car, when they have more equity in the secured assets than they can protect with their Minnesota bankruptcy exemptions.
What is the Difference between Chapter 7 and Chapter 13?
Chapter 13 bankruptcy is a reorganization whereas Chapter 7 bankruptcy is a liquidation, usually resulting in no payments to creditors from the bankruptcy estate.
A chapter 13 bankruptcy allows them to make up their overdue payments over time and to reinstate the original agreement. Where a debtor has valuable nonexempt property and wants to keep it, a chapter 13 may be a better option. However, for the vast majority of individuals who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.