Chapter 13 Bankruptcy For People With Regular Income

This type of bankruptcy involves a debt repayment plan. During the term of the Chapter 13 plan — at most five years — the filer makes regular monthly payments to the Chapter 13 bankruptcy trustee. 

Chapter 13 is often a good option for people who don’t qualify for Chapter 7 because they have too much income. But, they’re not the only ones who opt for Chapter 13.

Some people who qualify for Chapter 7 under the means test choose Chapter 13 instead because:

• They have non-exempt assets they want to keep.
• They have secured debt, such as mortgage loans, that they want to bring up to date through the bankruptcy repayment plan.
• They want to use the Chapter 13 process to reduce balances due and interest rates on certain types of secured debt.
• They want to convert second mortgages into unsecured debt through a process called “lien stripping,” which is only available when the first mortgage exceeds the value of the property.

Although Chapter 13 typically requires repayment of at least some unsecured debt, any dischargeable, unsecured debt remaining at the end of a successful repayment plan is eliminated when the discharge is entered. 

Since the legal process involved in Chapter 13 is much more nuanced, filing Chapter 13 without a lawyer is generally not a good idea. Having an experienced bankruptcy attorney who knows the ins and outs of Chapter 13 in your state by your side will greatly improve your chances of accomplishing your debt relief goals through a successful bankruptcy filing.