Think of a Chapter 13 bankruptcy case as a bill consolidation plan that imposes a settlement of your debt on your creditors. In a Chapter 13 case, we will help you develop a payment plan through which your creditors are paid at least a portion of what you owe over the course of a three-to-five year plan.
In a Chapter 13 case, you pay a single monthly payment to the Chapter 13 Trustee, who then distributes the payment among your creditors. Your monthly payment amount is determined by subtracting your necessary expenses from your monthly income. The “disposable income” that is left over after paying your necessary expenses is what you pay to the Bankruptcy Trustee. Under this plan, you never pay any creditor more than you can afford to pay, and you never need to “rob Peter to pay Paul.” That is, you never need to sacrifice one bill to pay another.
At the end of the three-to-five year plan, any debt that remains on things like credit card bills, medical debt, payday loans, debt from repossessed vehicles, etc., is discharged as it would be under a Chapter 7. This means that you no longer owe it, and your creditors can no longer chase you to try to collect it.
Your regular monthly payments to the Trustee provide evidence to lenders of your financial responsibility. This helps to re-establish a positive payment history on your credit accounts, which can help your credit score rebound more quickly.
It is easier to keep your house or car under a Chapter 13 plan because you can use the plan to make up past-due payments on your house or car over time. This means you can avoid giving past-due payments all at once, as you normally need to do under a Chapter 7 case.
We work with you to build a budget that accounts for your necessary expenses and keeps your monthly payment to the Trustee as low as it can be. This means that as long as your income remains consistent, you never pay more to the Trustee than you can afford. You can live in relative comfort, free from worry about how you will pay for food or utilities.
If your household income exceeds the state median income for your family size, you cannot file under Chapter 7. In that instance, you can file under Chapter 13 and have your eligible debts discharged after completing a Chapter 13 payment plan.
Chapter 13 bankruptcy gives you the flexibility to deal with changing circumstances. There are ways to deal with new debt, job loss, or other changing circumstances that are not available in a Chapter 7 case. For example, after you file your Chapter 7 case, you cannot file and receive a discharge under another Chapter 7 case for eight years. Also, after filing a Chapter 7 case, you cannot file and receive a discharge under a Chapter 13 case for four years. This means that if you incur new debt after filing a Chapter 7 case, you are stuck with it for at least four years. Chapter 13 bankruptcy avoids this problem.
If new debt arises after you file your Chapter 13 case, for example, from a car accident or some other source, there are ways to incorporate that new debt into an immediate bankruptcy case. We can do this by either dismissing the current Chapter 13 case and filing a new one or by converting a current Chapter 13 case to a Chapter 7. In either instance, the resulting new case will include the debt you listed in the original case plus the new debt.
If you lose your job or your wages were cut and you can no longer afford the Chapter 13 payment to the Trustee, you can recalculate your monthly income to determine what payment you can afford. This will allow you to continue your Chapter 13 case and receive your discharge. If it turns out that you can no longer afford to make a payment at all, you can convert your Chapter 13 case to a Chapter 7 and have all your eligible debt discharged.
If you incur new debt after completing your case, you can start the process again right away. Simply file a new Chapter 13 case immediately after completing a previous Chapter 13 case. In this way, Chapter 13 bankruptcy provides a flexible safety net that can catch you if life throws obstacles into your path to financial recovery.
If you're worried about how you'll pay Heydorn & Crull if you're bankrupt, don't be. We strive to meet your needs, no matter what your price point is. We can negotiate your Chapter 13 filing down payments to be low-cost, or even $0!
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