7. What is a Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy is a type of bankruptcy that requires that the debtor make payments to an a government-appointed official called the chapter 13 trustee for a three to five years before the debtor receives his bankruptcy discharge and his debts are erased.

The obvious disadvantages of a chapter 13 bankruptcy over a chapter 7 bankruptcy is that in chapter 13 bankruptcy you have to make payments which you don’t have to make in a chapter 7, and the process take 3-5 years as opposed to three months in a chapter 7.

There are many powerful reasons why a person may want to file a chapter 13 bankruptcy rather than a chapter 7 bankruptcy however. For example:

Car loans: If you owe significantly more on your car than what your car is worth and the car loan is at lease two and a half years old, you can pay for your car the reduced amount of what the car is worth by making payments to the chapter 13 trustee over a three to five year period.

Second Home Loans: If you have a second, junior loan on your home, or other real property, such as a HELOC, and the property is currently worth less than the amount you owe on the first, senior loan, you can strip the second loan off your property, by paying only what you can afford to pay to the chapter 13 trustee for three to five years and voiding the second loan when you receive your discharge at the end of that time.

Property over the Exemption Limits: If a debtor owns property that is worth more than the exemptions limits and he or she files a chapter 7 bankruptcy, the chapter 7 trustee will probably take that non-exempt property and sell it to pay the debtor’s creditors. If a debtor does not wish to lose that non-exempt property, he can file a chapter 13 bankruptcy and pay the chapter 13 trustee over 3-5 years an amount of money equal to the value of the non-exempt property he would have lost in a chapter 7 bankruptcy. This way a debtor can keep all of his property, make payments over time and still receive his bankruptcy discharge at the end of his payment plan.

If you have questions about what kind of bankruptcy is best for you, call Attorney Evan Livingstone at (707) 206-6570 or email him at evanmlivingstone@gmail.com for a free consultation.

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