What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, often called “wage-earner” bankruptcy, allows you to repay creditors through a structured repayment plan approved by the Court. The repayment plan typically lasts between 3 to 5 years, depending on your income. If your income is below the state’s median level, you can propose a 3-year plan. However, if your income exceeds the median level, a 5-year plan is usually required.
Who Qualifies for Chapter 13 Bankruptcy?
To be eligible for Chapter 13 bankruptcy, you must have a consistent and reliable source of income. Additionally, your unsecured debt total under $526,700 and secured debt under $1,580,125.
What Happens During a Chapter 13 Bankruptcy?
When you file for Chapter 13 bankruptcy, a Trustee is appointed to manage your case and ensure that you follow the repayment plan. Payments are typically made directly to the Trustee, who then distributes funds to your creditors. In some cases, a wage order may require your employer to deduct payments from your paycheck and send them to the Trustee, or you may need to handle payments yourself.
Filing triggers an automatic stay, which halts actions like car repossessions, wage garnishments, foreclosures, creditor phone calls, and lawsuits seeking judgments. However, secured creditors may request permission to lift the automatic stay in certain situations.
Once you successfully complete your repayment plan, most of your allowable debts will be discharged. For a detailed timeline of the Chapter 13 bankruptcy process, visit our Chapter 13 Bankruptcy Timeline.
What Debts are not Discharged in Chapter 13 Bankruptcy?
Some debts cannot be eliminated through Chapter 13 bankruptcy, including:
- Child support, alimony, or other court-ordered domestic obligations
- Certain income tax debts (unless the taxes were imposed at least three years prior to filing and returns were filed honestly and on time)
- Student loans
- Debts incurred through fraud, false pretenses, or false representation
- Luxury goods or services totaling more than $500 purchased within 90 days of filing
- Cash advances of $750 or more taken within 70 days of filing
- Personal injury claims resulting from drunk or intoxicated driving
- Criminal fines or restitution
- Traffic/Parking tickets and fines
- Restitution or damages for personal injury or death caused maliciously or willfully
How Can We Help?
If you’re considering Chapter 13 bankruptcy and want to know whether it’s the right option for you, we’re here to help. Contact us to schedule a free bankruptcy consultation with one of our experienced bankruptcy attorneys. Let us guide you through the process toward financial stability.
Contact us today to explore your legal options and start your journey toward financial freedom with trusted Kansas City bankruptcy lawyers by your side.
