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Understanding Chapter 13 Bankruptcy

 Posted on December 20, 2019 in Bankruptcy

If your personal financial situation has you considering filing for bankruptcy, you should know about your two options: Chapter 7 and Chapter 13 bankruptcies. Chapter 7 bankruptcy, sometimes referred to as 'straight' bankruptcy, is an effective way to wipe most of your debts clean in a matter of months, but there are several drawbacks to this type of bankruptcy. The largest caveat with Chapter 7 bankruptcy is that many people do not legally qualify for Chapter 7. Therefore, Chapter 13 is the only option for many personal bankruptcy filers. However, sometimes Chapter 13 is the better choice for many even if they qualify for Chapter 7.

What's Unique About Chapter 13?

The main differentiator between Chapter 13 and Chapter 7 is that under Chapter 13 bankruptcy, you will enter into a payment plan with your creditors. The plan, which is overseen by a bankruptcy trustee, almost always lasts between three and five years.The good news for you is that you might not even be liable for the full debt amount. An experienced bankruptcy attorney is often able to negotiate down the amount you owe. For these reasons, Chapter 13 bankruptcy is sometimes called 'debt reorganization.'

Another attractive feature of Chapter 13 bankruptcy is that you are allowed to keep valuable and essential property such as your house and vehicle. Some types of property valued at certain amounts are exempt from being seized during a Chapter 7 filing, but you will have much more security for your property and assets under Chapter 13. So, if you are interested in keeping your house, Chapter 13 is usually the optimal route.

How Do I Qualify for Chapter 13?

To qualify for Chapter 13 bankruptcy, you must have a steady income (in addition to a certain amount of disposable income). This income shows your ability to pay back at least some of your creditors in a payment plan. Conversely, you must pass a means test to qualify for Chapter 7 bankruptcy. This test measures your debt-to-income ratio. If the ratio is too high, then you will not be able to file for Chapter 7.


Filing for bankruptcy might not be your best day, but a Chapter 13 filing affords you many advantages, such as the ability to keep your house and car. Fulfilling the terms of the filing takes some time, but you can come out the other side of Chapter 13 with a clean slate and better financial habits. To get started on a better future, please contact us at Blossom Law PLLC today at 704-256-7766.

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