Chapter 13 Bankruptcy is called an Adjustment of Debts of an Individual with Regular Income. A Chapter 13 has a payment plan. The debtor may utilize a Chapter 13 Plan when he has the ability to pay some but not all of his debts or cannot pay under the existing contract terms. The Debtor may use the Chapter 13 Plan to save a home by paying the past due mortgage payments over the course of 3 to 5 years. A Chapter 13 Plan may also be utilized to pay debts that cannot be eliminated in a Chapter 7, such as income taxes. Further, the discharge, or elimination of debt, in a Chapter 13 is broader than the discharge of a Chapter 7. That is, some types of debts that cannot be eliminated under Chapter 7, may be eliminated in a Chapter 13 case.
The amount that debtor pays in his Chapter 13 Plan is determined by his ability to pay. Therefore, even if the debtor does not pay all of his general unsecured debt, it is still eliminated so long as the debtor pays what it determined he can afford. The debtor’s ability to pay is determined by taking an average of his income and subtracting his allowed expenses. Some of the expenses are what is actually expended and some expenses are based on established guidelines. The amount that is left, is the debtor’s ability to pay, called his disposable income.
The Law Office of Rodney K. Okano will draft and work to get your Bankruptcy Chapter 13 Plan confirmed. Once your Plan is confirmed, this is your new obligation to settle your debt. Thus, at the completion of a Plan, you may be completely current on your home mortgage payment and all consumer debt eliminated. A financial fresh start.
While the above are basic outlines of Bankruptcy relief under Chapter 7 and 13, there are many intricate details of any particular case that will determine the available options and available forms of relief. Any particular relief in Bankruptcy can only be determined after a thorough analysis with all of the facts and supporting documents.