Have you found yourself unable to afford monthly payments on some or all of your debts? Falling behind on payments can irreparably damage your credit and put your home at risk. However, a Chapter 13 bankruptcy can give you the means to catch up on your debts and reestablish your financial health. Contact Toronjo & Prosser Law for an initial case review with a Dallas Chapter 13 bankruptcy lawyer to discuss the advantages and disadvantages of reorganizing your debts and finances through Chapter 13. We want to provide you with the seasoned guidance you need to make informed decisions about how to resolve your financial challenges.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as a “wage earner’s” bankruptcy, enables individuals who earn a steady income to develop a plan to repay some or all of their debts. In a Chapter 13 bankruptcy, the debtor creates a repayment plan to repay creditors in installments over a period of three to five years. To qualify for Chapter 13 bankruptcy, a prospective filer must have unsecured debts of less than $526,700 and secured debts of less than $1,580,125. Furthermore, they must not have sought bankruptcy relief within the 180 days preceding their Chapter 13 petition and must complete mandatory credit counseling in that period.
Chapter 13 allows individuals to pay back debts over several years under a structured plan while remaining under the protection of the Bankruptcy Code. Furthermore, certain debt balances that remain at the end of the repayment plan may become eligible for discharge, meaning that the debtor no longer has any legal obligation to pay those debts.
The Chapter 13 Bankruptcy Process
A Chapter 13 bankruptcy begins when an individual files a petition with the bankruptcy court. The petition must include the following:
- A schedule of assets and liabilities
- A schedule of income and expenses
- A schedule of executory contracts and unexpired leases
- A statement of financial affairs
Married debtors who file must include their spouse’s financial information.
After an individual files for Chapter 13 bankruptcy, they must then submit a proposed repayment plan to the court, detailing the disposable income they will turn over each month and how that money will pay their debts. Chapter 13 plans must pay priority claims in full and also pay arrearages for secured debts in full if the debtor proposes to retain the collateral securing the debt. A plan does not require payment of unsecured debts in full if:
- The debtor will pay all their disposable income, and
- The unsecured creditors receive as much as they would under a Chapter 7 bankruptcy.
The bankruptcy court will also appoint a trustee to administer the case. The trustee will collect payments from the debtor under the repayment plan and disburse that money to the debtor’s creditors. The trustee will also hold a meeting of creditors, during which the trustee and the creditors may question the debtor about their financial affairs and the terms of their proposed repayment plan.
Once the debtor completes their repayment plan, they may receive a discharge of remaining eligible debts.
Benefits of Chapter 13 Bankruptcy
There are several benefits to filing for Chapter 13 bankruptcy, including some advantages over Chapter 7 bankruptcy. These include:
- Avoiding repossession and foreclosure: Chapter 13 can help you prevent repossession of assets like a vehicle or foreclosure of your home, as you can “cure” missed monthly payments through a Chapter 13 plan. That said, you must also make monthly payments that come due during your repayment plan.
- Keeping property: Unlike a Chapter 7 bankruptcy, Chapter 13 does not require you to sell property to pay back creditors. Instead, you can keep all your assets in a Chapter 13 bankruptcy because you use your monthly disposable income to repay creditors.
- Securing the automatic stay: Filing for bankruptcy imposes an “automatic stay” on your creditors, which prohibits them from starting or pursuing any efforts to collect your debts, including sending debt collection letters, making debt collection phone calls, repossessing assets, garnishing wages, and filing or continuing legal actions. You will not have any direct contact with creditors during a Chapter 13 case.
- Extending secured debts: In certain circumstances, a Chapter 13 bankruptcy allows you to extend the term of a secured loan, such as a car note, over the length of the repayment plan, which can reduce your effective monthly payment.
- Protecting co-signers: Chapter 13 bankruptcy includes special provisions that protect other people who have co-signed or guaranteed your consumer debts, ensuring that your creditors cannot pursue them for payment.
- Simplifying debt payments: With a Chapter 13 repayment plan, you can make one monthly payment of your disposable income to the Chapter 13 trustee, who distributes the money to your creditors per your repayment plan and bankruptcy law, rather than making monthly payments to multiple creditors. Thus, Chapter 13 can consolidate your debt payments, ensuring you do not miss payments to creditors.
How Can a Dallas Chapter 13 Bankruptcy Lawyer Help You with Your Case?
A Dallas Chapter 13 bankruptcy attorney from Toronjo & Prosser Law can help you pursue financial relief through a Chapter 13 case by:
- Reviewing your financial information and discussing your concerns, needs, and goals to help you determine whether Chapter 13 bankruptcy can best help you resolve your debts
- Preparing your bankruptcy petition and repayment plan
- Representing you during creditors’ meetings and in bankruptcy court
- Advising you throughout the term of your repayment plan, including assisting with any issues or financial challenges that arise
Contact Our Firm Today
Have your debts overwhelmed your finances, leaving you to face the prospect of going to collections, repossession, or foreclosure? If so, Chapter 13 bankruptcy might provide the relief you need. Contact Toronjo & Prosser Law today for a confidential consultation with a Dallas bankruptcy attorney to learn more about Chapter 13 bankruptcy and discuss whether it can help you resolve your financial challenges.