What You Need to Know About Chapter 13 Bankruptcy

 Posted on September 14, 2023 in Chapter 13 bankruptcy

Chapter 13 bankruptcy is a legal process that allows individuals to restructure their debts and build a repayment plan. Understanding the key aspects of Chapter 13 bankruptcy can help people assess whether it is the right option for their financial situation and navigate the process effectively. If you are interested in pursuing Chapter 13 bankruptcy, contact a lawyer to ensure you have the legal guidance and protection necessary to make well-informed decisions during this critical time.

Repayment Plan

One of the main features of Chapter 13 bankruptcy is the creation of a repayment plan. This plan outlines how the debtor will repay their debts in a timeframe of about three to five years. The repayment plan is based on the debtor’s income and expenses. It allows individuals to catch up on missed mortgage or car payments, pay off priority debts, and reduce or eliminate certain unsecured debts. 

Protection from Creditors 

Filing for Chapter 13 bankruptcy provides an automatic stay, which halts creditor collection efforts and protects the debtor from lawsuits, foreclosures, or repossession. This gives individuals the opportunity to negotiate with creditors and work on a debt 

repayment plan without the constant pressure of collection activities.

Eligibility and Income Requirements 

In Texas, not everyone is eligible for Chapter 13 bankruptcy. To qualify, people must have a regular income, and their unsecured debts must be below a certain threshold. Additionally, debtors must complete credit counseling within 180 days before filing for bankruptcy. Income requirements and debt limits vary depending on the debtor’s household size and the state in which they reside. 

Long-Term Financial Commitment 

Chapter 13 bankruptcy is a long-term commitment. The repayment plan can last three to five years, during which the debtor must make regular payments to the bankruptcy trustee. A stable income and discipline is essential to the repayment plan. Failure to make payments or comply with the plan’s terms can result in the dismissal of the case and the loss of bankruptcy protection. 

Credit Impact and Financial Rehabilitation

Chapter 13 bankruptcy will remain on an individual’s credit report for seven years. However, with responsible financial management and timely payments, people can begin rebuilding their credit during the repayment period. Completing a Chapter 13 bankruptcy can provide a fresh start and improve long-term financial stability. 

Contact a New Braunfels Chapter 13 Bankruptcy Attorney

Going through Chapter 13 bankruptcy can be scary. However, going through the process with legal representation can make it less intimidating and more manageable. Contact the skilled Kerrville Chapter 13 bankruptcy lawyer with Law Offices of Chance M. McGhee for legal counsel. Call 210-342-3400 for a free consultation.