Chapter 13 Bankruptcy

Chapter 13 requires you to use your income to repay some or all of your debt. You must prove to the court that you can afford to meet your payment obligations. If your income is irregular or too low, the court might not allow you to file for Chapter 13. If your total debt burden is too high, you are also ineligible. Your secured debts cannot exceed $1,149,525 and your unsecured debts cannot be more than $383,175. A “secured debt” is one that gives a creditor the right to take a specific item of property (i.e. collateral such as your house or car) if you don’t pay the debt. An “unsecured debt” (such as a credit card or medical bill) doesn’t give the creditor this right.

Some of the reasons people file for Chapter 13 bankruptcy is if their income falls above the median family income for Kansas. Also, a Chapter 13 bankruptcy may be your only choice if you are behind on your mortgage or business payments and you want to keep your property.

We will calculate and file a Chapter 13 plan for you.  The Chapter 13 plan must pay certain debts in full. These debts are called “priority debts,” because they’re considered sufficiently important to jump to the head of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax obligations.

In addition, your plan must include your regular payments on secured debts, such as a car loan or mortgage, as well as repayment of any arrearages on the debts (the amount by which you’ve fallen behind in your payments).

The plan must show that any disposable income you have left after making these required payments will go towards repaying your unsecured debts, such as credit card or medical bills. You may not have to repay these debts in full.

A trustee is appointed to administer plan payments and distribution to creditors. Your plan must be feasible-meaning you must be able to afford the payments that are required through your plan.  The bankruptcy court must confirm the plan. At the end of the plan period, if you have complied with its terms, you receive a discharge from your debts even though in some cases all of your debts have not been fully paid through the plan.

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