Chapter 13 Reorganization
Individuals may file Chapter 13 bankruptcy in Georgia to reorganize debt and keep property. Chapter 13 is an alternative for debtors who cannot file Chapter 7 due to earning too much income or because they have too many assets. Chapter 13 bankruptcy is also a good option for debtors who are delinquent on home or car payments and seek to repay the arrearages over time.
The Chapter 13 Plan
In a Chapter 13 bankruptcy case, the debtor proposes a payment plan to the court to consolidate debt. Mortgage arrears, car loans, tax debt, delinquent domestic support, and unsecured debt can be consolidated into a Chapter 13 plan payment. Payments under this plan are made to Chapter 13 trustee, whose job is to disburse money to the various creditors. In order successfully propose a plan, the debtor must prove that s/he is able to meet his/her monthly living expenses AND make the Chapter 13 plan payment. Factors such as monthly household income, amount of debt, and value of assets determine the amount of the monthly payment.
Chapter 13 Perks
Chapter 13 bankruptcy provides debtors with the ability to actually modify the terms of some loans as follows:
- Reduces interest rates on car loans;
- Reduces interest rates on other purchase money security loans (ie. furniture purchased on credit);
- Strips second mortgage liens on real estate that is under water;
- Reduces car loan amounts to fair market value of the car if the car was purchased more than 910 days before the bankruptcy case was filed.
Chapter 13 Timeline
Chapter 13 bankruptcy cases are proposed to last from 3 to 5 years, depending on how much money the debtor makes and how long it takes to repay all of the debt. After you file your Chapter 13 case in Georgia, a 341 meeting of creditors and a confirmation hearing are scheduled. In the Atlanta division of the bankruptcy court, 341 meetings occur about one month after the filing of the case; confirmation hearings occur about 60 days after the filing of the case. Your first monthly payment is due 30 days after you file your bankruptcy case. Many things can happen over the course of 3 to 5 years, so you may have to return to court for various issues over the years.
Differences Between Chapter 13 and Chapter 7
- Chapter 13 debtors repay creditors rather than wipe out debt like in Chapter 7;
- Chapter 13 proposes a 3 to 5 year plan vs. a Chapter 7, which usually lasts 4 to 6 months;
- Chapter 13 allows debtors to keep property where payments were delinquent prior to filing vs. Chapter 7 where debtors may lose property used as collateral for loans;
- Debtors who file Chapter 13 can file more than one case over the course of 8 years as long as the cases are not filed abusively; and,
- Chapter 13 allows debtors who own property with unexempt equity to keep the property, so long as the debtors are repaying unsecured creditors as much as they would receive in a Chapter 7 liquidation.
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