Bankruptcy in Brief

a service of the Moran Law Group

Why Chapter 13?

Chapter 13 bankruptcy is a repayment plan that allows the debtor to cure defaults on home mortgages, pay taxes, and discharge debts not dischargeable in Chapter 7 while protected from collection action.

Chapter 13 is a powerful tool for debtors to regain control of their financial lives and to get a meaningful fresh start.

Debtors choose Chapter 13 when

they owe debts not dischargeable in Chapter 7 ( such as taxes, child support, fraud judgments and tax penalties)

they have liens that are larger than the value of the assets securing the debt

they have years of unfiled taxes

they are behind on car or house payments

their assets are worth more than the available exemptions

Comparison of discharge in 7 & 13

What does the plan provide

The plan sets out how much money the debtor will pay to the trustee each month and how much should be paid to each category of creditor.

The Chapter 13 plan does not have to pay debts in full; it can provide for only fractional payment. How much the plan has to pay to creditors is a function of the Chapter 13 confirmation tests.

The Bankruptcy Code does require that priority claims such as recent taxes and family support be paid in full.

More on creative use of Chapter 13 for tax troubles and more still on possibly non dischargeable credit card debts in 13.

Reducing or eliminating liens

Who can file Chapter 13 bankruptcy
How Chapter 13 bankruptcy works

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Moran Law Group

Founding member of the BankruptcyLawNetwork- Real Lawyers Real Solutions

5/20/07