Chapter 13

Chapter 13 bankruptcy is a good solution to consumer debt for those who are able to commit to repaying their debt over a period of years. As with Chapter 7 bankruptcy, Chapter 13 bankruptcy allows you to discharge your debts, although it takes a longer time. There are a number of advantages to filing for Chapter 13. Because you have agreed to pay more of your debt than you would have with Chapter 7, you can keep more of your property. Experienced Bucks County bankruptcy lawyer John M. Kenney can help you decide whether Chapter 13 is a wise choice for you and make sure you seek the greatest possible discharge of your debts.

You will have to prove that you can use your income to repay some or all of your debt over three to five years. If you can prove this, your debts will be reorganized so that you make a single payment that will be distributed to creditors in order of priority. Priority debts include certain tax obligations, child support, alimony, and employee wages. Secured debts are those that permit a creditor to take a specific item of property if you don’t pay your debt. Unsecured debts include credit card and medical bills. Chapter 13 bankruptcy is not appropriate for those with a debt burden that is too high. It is also inappropriate for those with irregular income or insufficient income.

A big advantage of filing Chapter 13 bankruptcy is that you can keep most of your property, including both your house and your car, assuming you can pay off your arrearages in an appropriate fashion. To keep property, you will need to create a detailed repayment plan explaining how you will repay your debts. Priority debts will need to be repaid in full. You will also have to make regular payments on your secured debts and repay any arrearages, or overdue amounts.

The length of your repayment plan hinges on your income and your debt. If your income for the six months prior to your bankruptcy filing date exceeds the median income for Pennsylvania, you will need to propose a five-year repayment plan. When your income is lower than the median income, you can propose a three-year plan. Sticking to your repayment plan is the key to getting a discharge of your debts. If you lose your job during the repayment period or become seriously disabled and cannot work, the plan can be modified, or you may be permitted to discharge debts on the basis of hardship.

Chapter 13 bankruptcies offer several tools you can use to make repayment more manageable. For example, you can use “cramdowns” to reduce the principal balance of a debt to the value of whatever property secures the debt. Cramdowns are particularly useful in the context of new car purchases. Immediately after a car is purchased, it declines in value. If your car is worth only $7,000, but you owe $11,000, you can cram down your loan to $7,000 through Chapter 13 bankruptcy. The remaining $4,000 will be reorganized so that it is considered unsecured debt. You may have to pay a percentage of the unsecured debt, but the remainder will be wiped out after you complete your Chapter 13 plan, and you will own your car free and clear.

After you have completed your Chapter 13 repayment plan, any remaining debts that are eligible to be discharged will be discharged. This can be a good solution to significant consumer debt in Levittown. For a free consultation about whether filing for Chapter 13 bankruptcy will help in your particular situation, contact experienced Levittown attorney John M. Kenney. You can reach him by phone at (215) 547-3031, or by submitting an online inquiry. We serve clients in Bristol, Morrisville, Fairless Hills, Yardley, and Langhorne, as well as throughout Pennsylvania.