A big concern people rightfully have when filing a bankruptcy case is whether they can keep their house, cars, savings, and other assets.
In a Chapter 7 case, a Trustee is appointed to sell or liquidate any assets which are not exempt under applicable laws.
In most Chapter 7 cases, all the assets are exempt and the Trustee won’t sell anything.
But sometimes you may have too much equity in your house or excess value in other assets which cannot be protected in a Chapter 7 case.
In such cases, Chapter 13 can be a savior.
You Get To Keep All Your Assets In Chapter 13
In Chapter 13 you get to keep all your assets. The debtor filing the Chapter 13 case remains in possession of all property.
In return, you must pay your creditors:
- all your disposable income (income left over after you’ve paid all your normal living expenses), and
- the amount must total at least as much as your creditors would have received in a Chapter 7 case.
Payments in Chapter 13 can be made over as little as 36 months or as long as 60 months, depending on various factors.
Also, certain debts must be paid in full over the term of your repayment plan.
These include certain tax debts for periods less than 3 years old, past due domestic support obligations, and a few others.
Sometimes this might result in a higher payment than you have in disposable income, which can be a problem.
But there are sometimes ways to work around this, depending on the specific facts and circumstances in your case.
Catching Up On Mortgage Payments
Another benefit of Chapter 13 is that you can catch up on past due payments on certain debts.
This includes mortgages on your house, or car loans (under certain circumstances) and nondischargeable obligations such as some taxes and domestic support obligations.
This can enable you to stop foreclosure or repossession on these assets and catch up on the payments over up to 60 months.
You Must Continue Paying On Secured Debts
Of course, for assets that have secured debts on property that you want to keep, like your house or a vehicle, you must make all regular payments which come due after your Chapter 13 case is filed.
These payments, however, should already be part of your budget used to determine your disposable income and, therefore, ability to make the Chapter 13 plan payments.
Chapter 13 When You Have A Lot Of Assets or More Income Than Allowed For Chapter 7
Chapter 13 can be a great help when you have more assets than you can exempt and also if you have too much income to do a Chapter 7 case. Yes, you have to pay some money to your creditors over time, but it is almost always considerably less than you would otherwise end up paying.
Consult with an experienced bankruptcy attorney in your area to learn your options.
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