Chapter 13

Chapter 13 bankruptcy, also called “wage earners” bankruptcy, focuses on reorganizing finances, rather than discharging a debt. When you file Chapter 13 bankruptcy, your goal is to pay some of what you owe over a period of time, then the remainder of your debt will be discharged. In most cases, debtors end up paying only pennies on the dollar for debts like credit cards.

Chapter 13 bankruptcy is a good option for individuals and businesses who want to pay a reasonable amount to resolve their debt without liquidating assets. This is a common choice for individuals who are facing collections because once you file, they can no longer harass you or attempt to collect a debt.

How Does Chapter 13
Bankruptcy Work?

When you file Chapter 13 bankruptcy, you will work with a Bankruptcy Trustee to reorganize your finances. Together, you and your Trustee will work with creditors to establish payment plans. These plans are generally 3-5 years and are designed to help you pay off your debt by making manageable and affordable monthly payments.

To make your payment plan affordable, your Trustee will consider factors like:

  •   Mortgage payments
  •   Auto loans
  •   Child support or alimony
  •   Tax debts

With Chapter 13 bankruptcy, you can resolve secured and unsecured debts. Secured debts are items like a mortgage or auto loan. Unsecured debts are items like medical bills or credit cards. If there is a balance of unsecured debts once you complete the payment plan, that balance will be discharged. For secured debts, you have the option to continue making payments or surrendering the asset. Some debtors are also able to consolidate their student loans.

With that said, you do not have to surrender any property in order to complete Chapter 13 bankruptcy. You can choose to surrender an asset that you no longer wish to make payments on, but your assets will not be liquidated.

Contact a Chapter 13
Bankruptcy Attorney

If you are facing collections or mounting debt that you are struggling to repay, Chapter 13 bankruptcy may be a viable option for debt relief. Find out more about Chapter 13 bankruptcy and if it is the right option for you by contacting The Law Office of Erika Luna. Let our skilled bankruptcy attorney help you.