Chapter 13 is sometimes known as “reorganization” or the “payment plan.” Contrary to what people think, you generally do not pay back your debt in a Chapter 13. In fact, most of your debt is discharged.

Where a Chapter 7 focuses on your assets, a Chapter 13 focuses on your monthly budget. Instead of looking for you to give up your nonexempt assets, the court wants you to give up your available income in the form of a monthly payment.

So whether you have 10k or 100k in dischargeable debt, your payment will be the same.

Most of our Chapter 13 clients pay less than 10% to their unsecured creditors and the rest of the debt is discharged.

Thus, the higher your monthly expenses, the lower your required monthly payment and the creditors get less.

When should I file Chapter 13 instead of Chapter 7?

Most of our clients file under Chapter 7. Chapter 7 is quick and you will receive a 100% discharge of your qualified debt. Chapter 13 plans last between 3 and 5 years, so why do it? The main reasons people choose Chapter 13 are:

  • Household income is above median so you can’t file a 7
  • Filed Chapter 7 within the last 8 years
  • Mortgage is behind so you keep your home and put mortgage arrears into a plan
  • Strip a second or third mortgage if your first mortgage is greater than your home’s value
  • Car payment is too high so you can lower your payment and interest rate on most loans older than 2.5 years
  • Need to stop garnishment and get lower payments on nondischargeable debts with child support, state taxes, IRS, governmental entities, etc.
  • You have significant non-exempt assets you don’t want to lose

Chapter 13 is an attractive option for about a third of our clients who need the benefits that they can’t get in a Chapter 7.

Your consultation with our attorneys will help you see which Chapter 13 advantages apply in your situation.

The Chapter 13 Trustee will work to make your monthly payment as high as possible, while we work to keep it low.

The payment is determined by subtracting your monthly expenses from your income. The amount left over will be your payment. Our job is to make sure you are allowed to claim all available expenses so the payment is low.

A Moorhead Law Group bankruptcy attorney will use years of experience with the law,local practice and individual trustees to maximize your discharge and protect your income.


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