Chapter 13 is designed for individuals with regular income who would like to pay all or part of their debts in installments over a period of time. You are only eligible for chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code.

Under chapter 13, you must file with the court a plan to repay your creditors all or part of the money that you owe them, using your future earnings. The period allowed by the court to repay your debts may be three years or five years, depending upon your income and other factors. The court must approve your plan before it can take effect.

After completing the payments under your plan, your debts are generally discharged except for domestic support obligations; most student loans; certain taxes; most criminal fines and restitution obligations; certain debts which are not properly listed in your bankruptcy papers; certain debts for acts that caused death or personal injury; and certain long term secured obligations.

In almost 25 years of practice , our experienced consumer bankruptcy attorneys have helped hundreds of Texans get the “fresh start” they deserve. If you are considering a Chapter 7 petition, we will carefully explain the debts that can and cannot be discharged, and what property you can and cannot claim as exempt.

Situations where Chapter 13 can help:

1. You have a house in foreclosure that you want to keep. You may want to file a Chapter 13 because it is the only way to effectively keep your home. Chapter 13 allows you to propose a plan that pays all of the mortgage arrearage over a period of up to 5 years. You do not have to come up with any money in order to stay in your home. The arrears are paid out through the plan.

2. You have an automobile that you are behind on the payments. Chapter 13 will allow you to catch the automobile payments up through the plan. If you cannot catch up the automobile on your own, it is probably wise to look at Chapter 13.

3. You have an automobile that has been repossessed you want to get back. Chapter 13 will generally allow you to get the automobile back. As long as you file Chapter 13 before your vehicle is resold by the creditor, the creditor is required by law to return the vehicle to you. Usually the vehicle is returned within a few days of filing.

4. You are buying a car that has a high payment. Chapter 13 can help you lower your automobile payment in many ways. First, a Chapter 13 plan can go up to 5 years. This allows you to be able to stretch the remaining balance over 5 more additional years. Chapter 13 can also allow you to repay the loan under more friendly terms that may allow you to lower your interest rate or reduce the principal balance due under the automobile loan to the current value of the vehicle.

5. You owe money on a car that you purchased more than 2 ½ years ago. You may want to look at possibility filing Chapter 13. If your vehicle is more than 2 ½ years old, you are allowed to pay it as a secured debt in the amount of the current value of the vehicle instead of having to pay the full remaining balance. Depending on your circumstances, this might save you a considerable amount of money.

6. You are buying a car that has high interest loan. In a Chapter 13, you are not required to pay the current interest rate on your auto loan. Bankruptcy allows you to pay the loan back at a low rate based on the rate of the federal prime which is very low currently. A lower interest rate can make a big difference in both the monthly amount and the total amount that has to be paid to payoff the note.

7. You owe money to the IRS or State. If you owe back income taxes, a Chapter 13 can help you take control and save you money in the process. If the taxes are more than 3 years old, you may be able to classify them as a general unsecured debt and only pay them to the extent your income and expenses show you can afford to do so. This means much or all of the tax debt may be discharged. If the taxes are less than 3 years old, they have to be paid, but you are allowed to propose a plan which pays them without any further interest or penalties accruing. If you have tax debt, you probably already know that a large part of the debt consists of interest and penalties. Being able to have up to 5 years to pay the tax debt interest and penalty free can be a big savings.

8. You owe back child support. Child support cannot be discharged in any form of bankruptcy. But child support arrears can be reorganized and paid over a 5 year period. During the time you are in the Chapter 13, you are under the protection of the bankruptcy court and you cannot be held in contempt for failure to pay the support obligation.

9. You have a credit score that is not too bad despite having debt problems. While both Chapter 7 and Chapter 13 have some kind of negative impact on credit scores, a Chapter 13 is a reorganization bankruptcy and does tend to look better on your credit report than a Chapter 7. If your credit score is not bad and having as good a credit score as possible is important to you, you may want to consider filing a Chapter 13.