Chapter 13 is an individual reorganization which allows a debtor to retain his assets while making monthly payments to meet his debt obligations over a period of time, typically 5 years.

Chapter 13 is available to those with regular income which exceed the income eligibility requirements of Chapter 7. Also, a debtor may desire to file a Chapter 13 when he wishes to retain his home but needs a period of time to pay any arrearages on his home mortgage, has assets he wishes to keep and not be the subject of a Chapter 7 liquidation, or owe income taxes but needs a period of time to pay.

After filing a Petition seeking relief under Chapter 13, debtors must promptly file a plan which sets forth the proposed payments to maintain certain debts like a home mortgage and car loan, cure any arrears on these debts, and make provision to pay a portion, if not all, of unsecured debts such as credit cards and medical bills. The court must approve the plan, and once approved, creditors are required to accept the terms of the payment. If the court rejects the initial plan the debtor is given the opportunity to amend the plan to meet the objections and concerns of creditors and the court. Payments are made to the Chapter 13 Trustee and not directly to creditors, who then pays the creditors.

In a Chapter 13 a debtor may be able to eliminate or reduce a second mortgage or other mortgages or liens on a principal residence that were recorded after a first mortgage depending on the valuation of the home, the amount owed and other factors, such as whether the creditor has a security interest in assets other than the residence. Secured claims on motor vehicles may be reduced to the value of the vehicle depending on whether the loan for the vehicle was incurred in excess of 910 days preceding the filing of the petition.

If you are considering bankruptcy please contact Bogin, Munns & Munns, P.A. at its principal office in Orlando at 407-578-1334 or at our other locations in central Florida where bankruptcy services are provided, Clermont, Deltona, Kissimmee, Leesburg and Melbourne.