Chapter 13 Bankruptcy

Weighing Your Options

A Chapter 13 is one of two options for individuals, and is the most common choice. Here’s how to determine if a Chapter 13 bankruptcy in Kentucky is the right choice for you.

What is Chapter 13 Bankruptcy?

If you’re considering filing for Chapter 13 Bankruptcy in Kentucky, the first step is to decide if it’s right for your particular situation. A Chapter 13 is a repayment plan that offers distinct protections under the Federal Bankruptcy Code, allowing a debtor to reorganize debt and pay creditors in a monthly payment arrangement.

This type of bankruptcy is often referred to as a “wage earner’s plan” because a successful Chapter 13 requires the debtor to be employed so that monthly payments can be made to an appointed trustee. The Court will only confirm a Chapter 13 bankruptcy plan when a debtor can show that regular income or funds are coming into the household to make that monthly payment.

The amount to be repaid monthly and the length of repayment vary greatly from case to case depending on the debtor’s income, expenses, and several other factors.

Chapter 13 Advantages

A Chapter 13 plan can restructure certain debts so that the debtor repays under more favorable conditions, such as lower to no interest rates. Other benefits include the opportunity to remove qualifying liens from secured property, such as second mortgages or home equity lines of credit.

In a Chapter 13 repayment plan, debtors have the opportunity to keep property that may otherwise not have been protected under a Chapter 7 bankruptcy. In addition, for people that have fallen behind on their home loan or car loan (and may be facing an impending foreclosure or repossession), a Chapter 13 may give immediate relief from those threats and make arrangements with those creditors. This means that you can keep your home and car.

If you want to keep your home and car, and you make a livable wage, a Chapter 13 is your best option.

Chapter 13 Disadvantages

In a Chapter 13, a debtor must remain current on their monthly repayment plan, or they’ll be at risk of having their case dismissed. If this happens to you, your creditors will legally be allowed to call you again, and can garnish your wages, or take your car or house. A debtor must also remain in compliance with the Kentucky bankruptcy rules, which requires them to submit their budget, tax returns, and tax refunds annually.

If you’re in a Chapter 13 and don’t turn these things over to the trustee (the person to whom you make your bankruptcy payments), your case will be dismissed. Again, this means that your creditors can resume collection attempts. While a Chapter 13 requires you to be organized about making monthly payments and submitting proper documentation, it’s the best way to ensure that you’ll keep all of your assets. 

If you think that a Chapter 13 may be right for you, time is of the essence and you need to meet immediately with an attorney to discuss your rights under the law.

Call or text (502) 435-2593 to set up a free consultation with Attorney Tracy Hirsch to see if filing for a Kentucky Chapter 13 bankruptcy will help your specific situation. She’ll give you her expert advice, and help you get the relief that you need.

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