Chapter 13 bankruptcy involves a 36- to 60-month repayment plan. Most individuals incorrectly assume that a Chapter 13 bankruptcy requires them to pay back all of their debts. This is generally not true. A Chapter 13, however, does require a monthly payment.
There are three basic reasons to file Chapter 13. First, if you are facing foreclosure, we can stop the foreclosure and save your home. Second, if a vehicle is facing repossession. By filing a Chapter 13 bankruptcy, we can stop the repossession process and usually lower the vehicle payment. Third, if an individual's earnings are high enough that they do not qualify for Chapter 7 under an income test — called the Means Test.
Generally, the only debts paid in a Chapter 13 bankruptcy are mortgage arrears, vehicle payments, and some taxes. Rarely do debts like credit cards, medical bills, payday loans, or student loans get paid anything in a Chapter 13. They do, however, get discharged or eliminated. Student loans are an exception and do not get eliminated in a Chapter 13 bankruptcy, however, it does stop the payment on the student loan for up to a five-year period.
Our Missouri bankruptcy law firm can help you determine if a Chapter 13 bankruptcy is right for you. Contact us today to learn more.