CHAPTER 13 BANKRUPTCY
Chapter 13 Bankruptcies are limited to the extent that only those individuals and married couples with less than $383,175 in unsecured debt or $1,149,525 in secured debt qualify. Unlike Chapter 7, Chapter 13 is not available to businesses. (Chapter 11 is available to both businesses and high debt individuals who don’t qualify for Chapter 13).
Chapter 13 requires a regular source of income to fund a repayment plan. The source can be wages, retirement funds, annuities, or even third parties, such as a family member, making the payments. The amount of money that you will pay back depends upon your disposable income. Disposable Income is determined by taking your net income, minus allowable expenses such as: mortgage or rent payments, gas and electric, phone including cell phones, car operating expenses, food, insurance, car payments etc. Not included in the allowable deductions are current debt payments such as credit cards, student loan payments and payments on luxury items such as Motorcycles and RV’s.
Some of the benefits of Chapter 13 Bankruptcies include the ability to catch up on Mortgage deficiencies to save your home, and to strip or treat totally unsecured Second Mortgages as unsecured debt. For instance, if your home is worth $100,000 and you owe $110,000 on your first mortgage, you can treat your second mortgage likes unsecured debt, and it will be completely discharged once you finish your Chapter 13 plan.
In addition, non-support debt resulting from a divorce can be discharged in a Chapter 13 Bankruptcy. Also, since priority debt such as tax liability, tax penalties and support obligations must be paid in full, Chapter 13 provides a way to pay those debts while getting rid of your other debts at the end of 3 or 5 years, depending on the length of your plan.