Why would I choose a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a repayment plan that protects the debtor from collection actions throughout the repayment period and discharges any unpaid balances of dischargeable debts at the conclusion of the repayment period.

The discharge in Chapter 13 covers a few debts that cannot be discharged in Chapter 7.  Debtors choose to file a repayment plan under Chapter 13 when:

1. they owe debts not dischargeable in Chapter 7 ( such as taxes, child support, fraud judgments)
2. they have secured debts on real property or vehicles which they wish to scrape off.
3. they have liens on assets that are worth more than the debt they are securing
4. they have years of unfiled taxes
5. they are behind on car or house payments
6. their assets are worth more than allowed exemptions
7. their income is much more than their allowed costs

What are some of the important issues that the court considers?

This is an excerpt from a bankruptcy court case that details what the court looks at to decide if a person is permitted to file a chapter 7 (this Order is dated before the 2005 Reform Act, so may not be applicable): (1) Whether the debtor has a likelihood of sufficient future income to fund a Chapter 11, 12, or 13 plan which would pay a substantial portion of the unsecured claims; (2) Whether the debtor’s petition was filed as a consequence of illness, disability, unemployment, or some other calamity; (3) Whether the schedules suggest the debtor obtained cash advancements and consumer goods on credit exceeding his or her ability to repay them; (4) Whether the debtor’s proposed family budget is excessive or extravagant; (5) Whether the debtor’s statement of income and expenses is misrepresentative of the debtor’s financial condition; and (6) Whether the debtor has engaged in eve-of bankruptcy purchases.