Chapter 13 bankruptcy is commonly referred to as the repayment chapter. However, unsecured creditors like the credit card companies and medical providers often receive little, if any, repayment. Payments are made over a three to five year period to a bankruptcy trustee who distributes payments to creditors. If payments are made as proposed and confirmed by the Court, then the debtor will receive a discharge as they would in a chapter 7. Chapter 13 is generally the choice of those who do not pass the bankruptcy means test, are behind on mortgage and/or vehicle payments, or have non-dischargeable tax or delinquent child support debts. Mortgage arrearages may be paid over a three to five year period, which would bring the mortgage current. A debtor will not need to pay past due vehicle payments prior to filing, and vehicle payments can often be lowered by filing Chapter 13. For those who have owned a vehicle for more than two and half years, repayment may be based on the value of the vehicle instead of the amount owed. Tax debts incurred within three years of filing bankruptcy may be paid back without further interest and penalties, and tax debts older than three years can often be completely discharged. Child support arrearages may also be paid over the three to five year period, though the debtor will need to continue paying the current monthly child support obligation. Chapter 13 has greater flexibility than a Chapter 7, for a debtor may dismiss the case at any time or possibility convert the case to Chapter 7. Upon conversion to Chapter 7, additional debts incurred since the Chapter 13 case was filed may also be able to be wiped out (discharged). The debtor will not lose any property as long as unsecured creditors receive as much as they would have received in a Chapter 7 case.
Contact Hicks and Lickert at 501-771-1817 for a Free Consultation with our North Little Rock Bankruptcy Attorneys.