Chapter 13 bankruptcy is a debt readjustment plan or a wage-earner plan. Chapter 13 requires you to have a stable income. Most of what you earn beyond necessary living expenses will go to paying down at least part of your outstanding debts.
Unlike Chapter 7, this is not an immediate discharge of unsecured debt. Chapter 13 reorganization plans run 3 – 5 years depending on your debt level and income. However, Chapter 13 provides more options for those wanting to keep personal property – like homes and cars – since your income is used to pay your debts not sale of property. Chapter 13 also stops wage garnishment and extends coverage to any co-debtor.
Automatic Stay Protection
Chapter 13 bankruptcy also provides immediate Automatic Stay protection. Automatic Stay stops foreclosure proceedings, stops creditor harassment, and stops collections immediately. In Chapter 13 this protection lasts the length of the repayment plan giving you time to get back on track.
Exceptions
Most debts will have a percentage of what is actually owed paid by the end of the plan period. However, there are some “Priority claims” that have to be paid in full no matter what is discharged. Priority claims include: student loans, recent or unfiled tax debts, child support, alimony, and any debt incurred through DUI or intentional acts.
For those who feel morally obliged to pay their debts no matter what, or don’t qualify for Chapter 7, Chapter 13 may be your option for “doing the right thing”. Qualified Washington D.C. bankruptcy attorneys work with you every step of the way in repaying your debts.