Chapter 13 Bankruptcy

Chapter 13 bankruptcy, called a wage earner’s reorganization, involves a repayment plan in which you pay all or part of your debts over a plan period of three to five years.  Generally, you would file a Chapter 13 bankruptcy if  you own a home and are behind on your mortgage,  have a car payment that you would like to maintain if only you could have more time, have a recently repossessed car that you would like to get back, want to stop the constant collection calls, or want to stop garnishments or foreclosures.  In a Chapter 13 bankruptcy, you propose a repayment plan of how your debts would be repaid.  The bankruptcy court must approve the plan and, so long as you keep making payments in accordance with the plan, your creditors must stay away from you.  At the end of the three- to five-year plan period, with all plan payments made as agreed, your remaining debts, if any, will be wiped out.

During the plan period, you must make the plan payments to the Chapter 13 bankruptcy trustee, who then distributes your payment to your creditors.  This is called funding your plan.  Your plan must be funded within 30 days of your filing the Chapter 13 bankruptcy.  During the first and second 30 days of the plan, you may be required to make plan payments directly to the trustee.  However, subsequent plan payments will usually be deducted directly from your wages through a payroll deduction filed with your employer, and paid to the trustee for distribution to your creditors.

To qualify for a Chapter 13 bankruptcy, your plan must pass two tests: (1) the best-interest test; and (2) the best-efforts test.  The best-interest test requires that your unsecured creditors (for example, credit card companies) be paid at least as much as they would be paid had you filed a Chapter 7 bankruptcy, instead of a Chapter 13.  The best-efforts testrequires you to pay all of your disposable income (that’s the amount left after you’ve paid your reasonable living expenses) to the trustee for at least the first 36 months of your repayment plan.  If your monthly income is more than the State of Georgia median income, the expenses you’d be allowed would be based on IRS Collection Financial Standards, and your plan must cover five years.  If your income does not meet this requirement, your actual expenses will be used in determining your payment amount, so long as the actual expenses are reasonable.

During your consultation with us, we can help you determine whether Chapter 13 is the best option for you.  However, to help us do that, we request that you come to the initial consultation with the information that we will need in order to make that determination.  Please see the WHAT TO BRING TO A CONSULTATION section of this website to help you gather the necessary information for the determination.

We’ve tried to anticipate the questions that you may have about bankruptcy on this website.  However, should you have any further questions after reading the information on this website, do not hesitate to contact us at (770) 962-7201.

Remember, your initial consultation is free.

We are a debt relief agency.  We help people file for bankruptcy relief under the Bankruptcy Code.