In a chapter 13 case, creditors are given an opportunity to object to the plan. If no objection is filed by creditors or the trustee, the plan may be confirmed as filed. Once the plan is confirmed, the trustee will distribute the proceeds of the debtor’s plan payments to creditors until the debtor completes the plan or the court dismisses or converts the case. Upon completion of the chapter 13 plan, the court will issue a discharge order; the trustee will prepare a final report, and the case will be closed.
Known as “reorganization” bankruptcy, Chapter 13 is often the only option for debtors who do not wish to lose their home while they undergo bankruptcy. Chapter 13 bankruptcy requires the debtor to create a plan to pay off some or all of the debt they owe within a time frame of three to five years.
The most obvious benefit of Chapter 13 bankruptcy is that it allows you to keep all of your property while you repay your debt, even large homes and expensive cars. In addition, Chapter 13 can protect you from foreclosure on your home if you uphold your end of the payment plan you will develop in the course of the Chapter 13 process. Your debts are not totally wiped out, but they can be reduced.
However, Chapter 13 does present some challenges for debtors. First and foremost, the plan is extended over three to five years, which means that years worth of your income are tied up in repayment. In addition, some workers, such as stock or commodities brokers, are ineligible for Chapter 13 filings. And Chapter 13 candidates cannot owe more than $1 million.
Instead of liquidating your debt like Chapter 7, Chapter 13 bankruptcy allows you to reorganize your debt and pay it off over time. However, you usually do not end up paying all of your debt; instead, your debt is released after three to five years of on-time payment according to plan. Due to the complexities associated with Chapter 13 debt, including putting together a realistic payment plan, it’s a good idea to seek legal assistance if you’re considering Chapter 13.
Robert Aronov & Associates, P.C. have experience helping debtors find financial freedom through Chapter 13 bankruptcy. Our happy clients are able to navigate the New York bankruptcy system with the helped of an experienced, aggressive bankruptcy attorney who has their best interests in mind and knows how to protect their assets and their financial future. Think Chapter 13 bankruptcy might be for you? Contact us today for a free, confidential phone consultation.
These are the differences between chapter 13 and chapter 7 bankruptcy. Learn everything else you need to know about the bankruptcy process by clicking here.