You are required to repay your creditors some or all of the debt according to a Bankruptcy court approved repayment plan under a Chapter 13 Bankruptcy.
Filing Chapter 13 in Texas
A Chapter 13 allows you to keep secured assets such as a home or car. But you can only keep them if you have more equity in the secured assets than you can protect with the Texas bankruptcy exemptions.
Filing it allows you to reorganize your personal finances and regain control of your financial situation.
Generally, a Chapter 13 bankruptcy can:
- Stop debt collection harassment
- Stop foreclosure of your home to allow you to catch up on missed mortgage payments
- Stop repossession of property like your car
- Allow you reorganize your finances by reducing your monthly payments to creditors if you do not qualify for a Chapter 7 and more
- Protect co-signers
- Stop interest from accruing on your federal, state or local tax debt
- Allow you to keep valuable non-exempt property
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A Chapter 13 bankruptcy allows you to catch up on overdue payments after which the original agreement can be reinstated. All your remaining dischargeable debt will be released at the end of the plan, but you will need to stick to the terms of the repayment agreement.
For example, if you file a Chapter 13 to stop foreclosure proceedings, you will still have to make all mortgage payments that come due during the Chapter 13 plan on time.
Your disposable income will be among the factors that will help determine the amount to be repaid. The total amount paid to creditors under the Chapter 13 plan, must be at least similar to the amount the creditors would have received if you had filed under Chapter 7 Bankruptcy. However, there are certain things that a Chapter 13 cannot do. They include:
- Discharge past due IRS debt, child support, property taxes, and most student loans
- Waive criminal fines, fees, penalties and restitution
- Discharge debts that come after the bankruptcy has been filed
- Stop your home from getting foreclosed or car repossessed if you do not make payments
Chapter 13 Eligibility – Means Test
The repayment process or plan can last 3 to 5 years, but you will only qualify if you have a regular source of income. You may file a Chapter 13 even if you are self-employed or operating an unincorporated business but not if you are a stockbroker or commodity broker. But your secured debt total has to be less than certain dollar amounts (they change frequently, so call the office to find out) and your unsecured debts should be less than the legally prescribed amounts as well.
You can also file if you haven’t received a bankruptcy discharge in the last 4 years or filed for Chapter 13 in the last 2 years.
A Chapter 13 bankruptcy is a time tested responsible way to address your financial difficulties in a straightforward and honest manner. If you don’t want pay back any of the debt but want to eliminate the debt, then a Chapter 7 bankruptcy is the most attractive choice.