Individuals filing for bankruptcy in Pennsylvania have three choices: Chapter 7, Chapter 11 and Chapter 13. When filing for Chapter 13, the debtor makes a monthly payment to a trustee for three to five years, who, in turn, will distribute it to three to five creditors to help settle the debt.
The goal of Chapter 13 payments
The goal of Chapter 13 bankruptcy plan is to give you a chance to get caught up on mortgage or vehicle payments or to pay non-dischargeable debt while the plan is in effect. Chapter 13 differs from the other types of bankruptcy because it focuses more on your repayment plan than selling some of your property.
How Your Payments are Determined
To be eligible for Chapter 13, you must demonstrate that you have a regular and reliable income from employment, a business, Social Security, a pension, or similar sources. You must provide the court with a list of your monthly expenses. Payments for some plans can change yearly if your income increases or decrease. Other factors that determine how much you pay include:
- The total amount of your debts
- The types of debts
- The value of your property
You have a right to debt relief
The U.S. Constitution specifically gives you the right to eliminate debts in bankruptcy. When you file Chapter 13, you receive an instant stay from creditors who can no longer collect on your debts while your case is in progress. This bankruptcy route can also help you avoid foreclosure on your home and allows for the discharge of some unsecured debt like medical bills and credit cards.
Chapter 13 bankruptcy isn’t for everyone. Fully assess your options before deciding whether this option or Chapter 7 or Chapter 11 are more appropriate.
