What is Chapter 13 Reorganization Bankruptcy?
Chapter 13 bankruptcy, or reorganization bankruptcy, allows the filer to
restructure his or her debt into a three to five year repayment plan.
With this option, the filer could end up discharging some debts while
obtaining more time to pay off others. Even if a debtor does not pass
the qualifying means test required to file for Chapter 7 bankruptcy, there
is a good chance that they will be eligible to file under Chapter 13 of
the United States Bankruptcy Code.
Filing for reorganization bankruptcy could allow you the second chance
you need to turn your financial situation around and to achieve renewed
stability and peace of mind.
Chapter 13 bankruptcy can be beneficial for individuals who:
- Have a monthly income that is too high to qualify for Chapter 7 bankruptcy
Want to protect their home from
- Want to preserve assets or property that may be exposed in a Chapter 7
- Want to repay tax or other debt through an affordable payment plan
Chapter 13 Debt Limits
Unlike Chapter 7 bankruptcy, in which a person can file for a discharge
of unlimited amounts of debt, there are debt limits for individuals with
“regular income” under a Chapter 13 plan, which means that
it is not the right option for everyone.
Chapter 13 bankruptcy is more complex than Chapter 7 and takes more time
because there is an intricate set of rules for how different types of
creditors are repaid over the three to five year period. These rules provide
debtors with many advantages and can help debtors deal with things like
vehicle loans, home mortgages, income tax liens, unprotected assets, and
more. Because there are so many advantages to this type of filing, Congress
has imposed certain debt limits.
As of April 1, 2016, debt limits for Chapter 13 bankruptcy have increased
to reflect changes in cost of living.
The current debt limit for Chapter 13 filing is $394,725 for unsecured
debts and $1,184,200 for secured debts.
Every individual’s situation is different, so please contact Wadhwani
& Shanfeld for an assessment of your unique financial situation.