In a chapter 13 bankruptcy, your debts are reorganized, rather than liquidated. If you file for chapter 13 bankruptcy, the court will randomly assign you a trustee to help allocate your funds. You will make monthly payments to your trustee, who will then disperse payments to your creditors. The amount of your monthly payments will be determined by several factors, and will be ultimately based on what you can afford. This process continues for about 3-5 years, after which time any debt still owed to your creditors will be discharged.

If you file for a chapter 13 bankruptcy, you are probably going to be able to keep your house or car, even if you are behind on your payments. Any junior mortgages on your house (including home equity lines of credit) can be stripped off, and car loans can be lowered. Even though you are still making payments towards your loans and other debts, most people who file for chapter 13 bankruptcy end up paying significantly less than if they had tried to pay off their debts another way.

Eligibility for a chapter 13 bankruptcy ultimately comes down to how much debt you have. To qualify, individuals cannot have secured debt (debt that is collateralized by an asset such as a house, car, etc.) that exceeds $340,000, or unsecured debt (other types of debt, usually credit cards or medical bills) exceeding $1,000,000. If your debts are greater than these amounts, you may have to consider filing for chapter 11 bankruptcy.

If you think you may qualify for chapter 13 bankruptcy, call Williams & Cluff for a free case consultation. We can help you determine your eligibility, and get you started on your journey towards financial control and independence.

We want you to feel comfortable and knowledgeable about the bankruptcy process. If you still have questions about how bankruptcy could affect your life, please visit our Frequently Asked Questions page, or call us for a free consultation.