What Is A Chapter 13 Bankruptcy?

Bankruptcy is a legal proceeding that allows individuals and companies to reorganize or erase debts when they are unable to pay their creditors. By filing a bankruptcy under one of the chapters of Title 11 of the United States Bankruptcy Code, you can get a “fresh start” to recover from a financial crisis.

The United States Supreme Court ruled in the case of Local Loan Co. v. Hunt (1934) that bankruptcy “gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Many individuals choose Chapter 13 as a means of reorganizing their debts to resolve debt problems and protect assets.

Chapter 13 – Adjustment of Debts of an Individual with Regular Income

Through a Chapter 13, a debtor can reorganize his or her debts into a manageable monthly plan. In order to qualify for a Chapter 13 bankruptcy, the debtor must have a steady income. Chapter 13 is referred to as a “wage earners” bankruptcy because the debtor proposes a bankruptcy plan to repay a percentage of his or her unsecured debts over a three to five-year period. Once the debtor completes the Chapter 13 plan, the remaining unsecured debt will be discharged.

In some cases, the debtor may also include secured debts such as a car loan in the plan in order to stretch out the payments over a longer term to lower the payment and reduce the interest rate. While some debts are not dischargeable in bankruptcy (i.e. most taxes, alimony, child support, most student loans, etc.), debtors can include these debts in a Chapter 13 plan as part of a strategic plan to reduce debt and provide much needed financial relief to the debtor.

Advantages of filing a Chapter 13 bankruptcy include stopping foreclosure, preventing repossession, stopping garnishments and protecting assets. If a debtor does not qualify for a Chapter 7 or if he may lose assets by filing a
Chapter 7, a Chapter 13 gives the debtor relief from his or her debts while allowing him or her to retain his or her property.

Because filing a Chapter 13 commits the debtor to a plan of up to 60 months in length, consulting with an experienced bankruptcy attorney to weigh the advantages and disadvantages of filing Chapter 13 is recommended. Our attorneys are well versed in bankruptcy and non-bankruptcy alternatives to provide you with the best legal advice regarding filing a Chapter 13 bankruptcy case.

We’ve Helped Thousands of KY Families, we can help you!

The bankruptcy lawyers at Musselwhite Meinhart & Staples have been helping individuals just like you solve their debt problems since 1982. Our Louisville and Radcliff and Elizabethtown bankruptcy attorneys have the expertise and knowledge you need to find an affordable solution to your financial situation.

Call our office at 270-351-6032 or to schedule a free consultation with one of our Radcliff and Elizabethtown or Lousiville bankruptcy attorneys. If you prefer, you can send a secure message through our online contact form and one of our friendly staff members will contact you to answer your bankruptcy questions. We have offices in Radcliff and Elizabethtown and Louisville for your convenience.