Debtors who file for Chapter 7 bankruptcy aren’t necessarily off the hook. Some liens and debts can survive the Chapter 7 filing or problems can pop-up after filing that change the circumstances of bankruptcy, life happens.
Debts like taxes, school loans and mortgage servicers can remain a problem since they aren’t discharged. And besides non-discharged debts, unplanned events can also impact your life. A medical emergency, divorce, or job loss has the potential to eliminate the positive effects of a prior bankruptcy. Many people who file for Chapter 7 need another chance at debt relief.
How can Chapter 13 help?
Chapter 13 is a repayment of a portion or all of your secured and unsecured debts over a period of 3 to 5 years. It is meant to allow people facing financial hardship to make smaller payments each month in order to control their debt load and minimize the consequences of delayed payments.
A monthly payment that lumps all of your debts is sent to a trustee who will distribute the money to your creditors. If you file Chapter 13 within four years of filing Chapter 7, you cannot discharge your debts. But you can still file the Chapter 13 to keep creditors from suing you, foreclosing, garnishing your paychecks or levying your bank account.
If you file Chapter 13 four years after filing Chapter 7, you can have a very low monthly Chapter 13 payment plan and receive a full discharge of all remaining balances after you complete the 3 to 5 year plan.
When Chapter 13 isn’t an option
There are some circumstances in which Chapter 13 isn’t an option. If you had a bankruptcy case dismissed within 180 days because of a failure to appear in court or you still owe more than $360,000 in unsecured debts or $1 million in secured debts than you can’t file for Chapter 13 bankruptcy.
If you are unsure of whether you have the ability to benefit from an additional bankruptcy filing, contact us today and we’ll be glad to help.