“WAGE EARNER” BANKRUPTCY

Chapter 13 Bankruptcy is a process of bankruptcy that allows you to repay a portion of your debts over time.  Generally speaking a Chapter 13 Bankruptcy will last anywhere from 3 to 5 years and the Bankruptcy Court will monitor the status of your bankruptcy to ensure that both creditors and debtors follow the agreed bankruptcy discharge plan.  Chapter 13 is generally called a “wage earner” bankruptcy because those filing for Chapter 13 protection have regular income above the “Means Tests” and can therefore afford to pay, for a time, an amount into the Bankruptcy estate to help resolve and satisfy the debts of the filer.

SEE ALSO INFORMATION ON

DEBT NEGOTIATION

CHAPTER 7 BANKRUPTCY

HOW CHAPTER 13 BANKRUPTCY WORKS

Chapter 13 is a type of bankruptcy protection that is available to those who do not qualify for Chapter 7.  Whereas Chapter 7 takes approximately 4 to 6 months to complete, Chapter 13 requires ongoing case management from the bankruptcy court and requires the parties to enter into an approved schedules for the repayment of debts.  It is a great option for people who have unsecured debts they want to repay at an approved amount over a set course of time and for people who likely have assets worth subtantially less than the total amount owed on those assets.  For example, in a Chapter 13 bankrupcty case, if you own a home with a 2nd and maybe even a 3rd mortgage, you can wipe clean the second and third mortgage and keep the home.  In short the trade off in the Chapter 13 bankruptcy is that you are allowed to keep assets as long as you agree to repay your debts for a period of about 3 to 5 years (depending on your particular situation).

BENEFITS OF CHAPTER 13

Generally speaking, Chapter 13 lacks the same type of speed and relief that Chapter 7 affords.  However, there are positive benefits to Chapter 13 bankruptcy protection.  For instance, you and your creditors come up with a repayment plan for your secured and unsecured debts.  If the assets you wish to keep are worth substantially less than the debt owed on those assets, a Chapter 13 repayment plan will take into consideration the actual value of the asset and allow you to pay that amount versus the total amount of the debt for that asset.  It is a cram down principle that allows the debtor to repay the actual value versus the total value. 

Moreover, filing for Chapter 13 bankruptcy protection generally hits your credit softer than a Chapter 7 filing.  While both take the same amount of time to come off your credit report, Chapter 13 filers generally see a higher overall credit score throughout the pendancy of their bankruptcy case than Chapter 7 filers do.  Last, you are allowed to keep more of your assets and still resolve your debts in a shorter amount of time than attempting to resolve your debts on your own without filing for bankruptcy.

CREDIT COUNSELING

Prior to filing for bankruptcy you must complete a credit counseling course that is approved by the bankruptcy court in the jurisdiction you plan on filing your bankruptcy petition.  These credit counseling courses generally range from $30 to $60 dollars and can be done online – generally taking anywhere from an hour to two hours to complete.  Please note that you must also take another of these credit counseling classes after your Meeting of Creditors Hearing (341 Hearing).  Please call us at (480) 570-6591 for more information on credit counseling.

The Law Offices of Simon P. Kennedy, PLLC is a debt relief law firm providing clients debt relief services and/or bankruptcy to clients in the greater Phoenix area, including, Phoenix, Tempe, Scottsdale, Chandler, Queen Creek, Glendale, Mesa, Gilbert, Peoria, Sun City, Avondale, and Tolleson.  We also provide bankruptcy and debt relief services in Pinal County, Coconino County, Yavapai County, Prescott, Flagstaff, and Yuma.

The Law Offices of Simon P. Kennedy, PLLC, is a debt relief agency and helps clients reduce and liquidate client debt through debt negotiation and bankruptcy