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What is Chapter 13 Bankruptcy?

A chapter 13 bankruptcy is utilized most often by consumer debtors who do not qualify for chapter 7 bankruptcy but still need relief from their debts. To qualify for a chapter 7 bankruptcy, a debtor must pass the means test. If the debtor’s income is too high to qualify for a chapter 7 bankruptcy, the debtor may proceed to file under chapter 13. To qualify for chapter 13 bankruptcy protection, the debtor must have regular income and their unsecured debt must not exceed $360,475.00 in total.

Why File for Chapter 13 Bankruptcy Protection?

Aside from income requirements a debtor may seek to file under chapter 13 for other reasons including:

  • The debtor filed a chapter 7 bankruptcy in the last 8 years.
  • The debtor is behind on mortgage payments and seeks to bring the loan current in a chapter 13 bankruptcy.
  • The debtor has a second mortgage and would like to remove the second mortgage in a chapter 13 bankruptcy. (Certain limitations may apply.)
  • The debtor has a significant amount of debt which is not dischargeable under chapter 7 bankruptcy protection, but which may be discharged in a chapter 13 bankruptcy.
  • The debtor has significant non-exempt assets which would be subject to turn-over and liquidation in a chapter 7 bankruptcy.

The process of filing a chapter 13 from the debtor’s perspective is not much different than filing under chapter 13 with the exception of a repayment plan and duration of the bankruptcy case.
From the debtor’s attorney perspective, there is a lot more work involved in a chapter 13 than a chapter 7. The attorney’s fees in a chapter 13 are generally much higher. This office bills a minimum of $3300 for a chapter 13 whereas our fees in a chapter 7 start at $650.00.

The most common differences between a chapter 7 bankruptcy and a chapter 13 bankruptcy:

  Chapter 7 Bankruptcy   Chapter 13 Bankruptcy
Liquidation of assets In some cases No
Debt Repayment plan No Yes
Meeting of creditors Yes Yes
Confirmation hearing No Yes
Attorney’s fees Start at $600.00 Start at $1500.00
Bring mortgage current? No Yes
Remove second mortgage? No Yes with exceptions
Discharge student loans No No
Duration until discharge 4 months 3-5 years
Cram down auto loans No Yes
Remove judgment liens? Yes Yes
Maximum income threshold Yes No
Maximum debt threshold No Yes
Chapter 7 Bankruptcy FAQ Chapter 13 Bankruptcy FAQ

Filing for chapter 13 bankruptcy is different for everyone. Contact Consumer Law Pro today at (303) 297-7729 to set up your free initial consultation, and get your questions about chapter 13 bankruptcy answered within the context of your unique situation.