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Chapter 13 is also Known as a Reorganization Bankruptcy
Chapter 13 has no Income Limit
Chapter 13 bankruptcy offers people a measure of flexibility, and may be best for those with assets. There are no income limit, but debt limits apply. If you own a home or other substantial assets that you could be forced to give up in a Chapter 7 bankruptcy, Chapter 13 bankruptcy may help you get relief from crushing debt problems. Chapter 13 bankruptcy offers people a measure of flexibility that is not available in Chapter 7. From our office in Covington, we help people across the Tri-State area seek bankruptcy relief. Request a Consultation with Michael E. Plummer our law firm to learn more about your options.
How Does Chapter 13 Work?
Under Chapter 13 bankruptcy, you will establish a plan to reorganize your finances and repay your creditors over a three- to five-year period. Certain debts, such as priority debts and fully secured debts, must be paid in full. Priority debts include certain kinds of tax debts, unpaid spousal support and unpaid child support. The primary example of a fully secured debt is a mortgage. If you complete the terms of your payment plan, your remaining unsecured debts, such as credit cards and medical bills, will be discharged at the conclusion of your plan.
Chapter 13 Bankruptcy Can Give You Relief From a Second Mortgage
Under certain circumstances, Chapter 13 bankruptcy can help you remove a second or additional mortgage. If your home is worth less than the balance of your first mortgage, you can discharge the value of your second or subsequent mortgage. For instance, if your first mortgage is worth $150,000, and your second is worth $25,000, but the value of your home is now only $145,000, you can discharge the entire second mortgage in bankruptcy. This process is known as lien stripping and can be very advantageous to homeowners.