If a debtor does not qualify for a Chapter 7 discharge, or simply requires additional time to repay outstanding debts, a Chapter 13 bankruptcy should be considered. Under a Chapter 13 bankruptcy a reorganization plan is filed and a debtor begins to make payments within thirty days after the filing. This allows a debtor to make current payments, as well as cure outstanding debts which are in arrears. The goal is to eliminate debts in arrears over the life of the Chapter 13  plan which typically lasts three years but can be extended to five under special circumstances. A Chapter 13 bankruptcy can assist debtors who are behind in payments by stopping foreclosure and repossession proceedings. In certain cases, a debtor may even be entitled to the return of a repossessed vehicle.

The qualifications to be a Chapter 13 debtor are as follows: (1) the debtor must have regular income; (2) have less than $336,900 of noncontingent, liquidated, and unsecured debt; and (3) have less than $1,010,650 of noncontingent, liquidated, and secured debt. (Note that these amounts are adjusted ever three years and will next be adjusted on April 1, 2010.) Federal law also provides that the bankruptcy court cannot grant a discharge if the debtor has received a discharge in a case filed under Chapter 7, 11, or 12 during the preceding 4 years, or in a case filed under Chapter 13 in the preceding 2 years.

As always, you should consult an attorney to see if a Chapter 13 bankruptcy filing is right for you.

- Richard V. Stokan, Jr.