What is the difference between  the debt relief  methods of Bankruptcy?

Most people can qualify for Chapter 13 if they have a regular source of income and owe unsecured debts of $336,900.00 or less, and whose secured debts are $1,010,650.00, or less.  You may file Chapter 13.

Debtors who are facing foreclosure of their home, repossession of their vehicles, seizures of assets and IRS wage garnishments, can stop such actions of creditors by filing for Chapter 13 protection if they meet the qualifications of having a regular source of income and the total amount of their debts are within the amounts of debt limitations of the title 11 under the bankruptcy chapter 13. Debtors file a plan of reorganization involving monthly plan payments for a minimum of three years, but not more than five years. During the term of the Plan, the debtor pays any arrearages for secured property that are to be retained and non-dischargeable liabilities such as certain kinds of taxes.

Chapter 13 is preferred by debtors who have valuable assets, such as a home, boat, plane, coin collection or other assets that are not completely covered by state or federal exemptions and that they wish to keep these assets.  With Chapter 13, this is possible since debtor proposes a plan to repay creditors over a three to five year time period during such time the debtor(s) can pay the overdue payments on any assets. They can also pay into the plan the equivalent value of any assets not covered by exemptions. Most people use this plan when they have assets that are worth more than the debt. Or the house they own right now may be worth less than what they owe but it would be beneficial for them to keep the residence.  Since the debtors plan will require regular monthly or biweekly payments, Chapter 13 is usually only appropriate for an individual debtor who has a regular source of income.

During the confirmation hearing, the court approves or disapproves the plan. This mainly is based on weather the plan meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 and Chapter 7 is there to help the debtors but they are very different from each other.  A Chapter 13 debtor commonly remains in possession of the property of the estate and makes payments to creditors through the trustee. The trustee gets a portion of each payment. The payment is based on the debtor’s anticipated income over the life of the plan.  Unlike a Chapter 7, in a  Chapter 13, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. What is nice about Title 11, Chapter 13, the debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect. The discharge is also considerably broader (more debts are eliminated) under Chapter 13 than the discharge under Chapter 7.   The major down side is that the plan must be paid back over time.

Also your payment to the Trustee in a Chapter 13 Bankruptcy  must begin within thirty (30) days of the petition date. The Chapter 13 Trustee distributes ninety percent (90%) of the funds to creditors pursuant to the terms of the Plan.

The Chapter 13 debtor is entitled to receive a Discharge Order from the Bankruptcy Court upon completion of all payments of a Plan that has been confirmed by the Court. The Discharge Order releases the debtor from all claims of creditors provided for in the Plan or disallowed by the Court.  This is one protection under Chapter 13 bankruptcy.

A creditor who received timely notice of the filing of the Chapter 13 petition, but failed to file a formal written claim may NOT thereafter bring or continue a legal action to collect the discharged debt.

Certain long-term obligations of a debtor are not, however, discharged by the filing or successful completion of a confirmed Chapter 13 Plan. Home mortgage payment is an example of this. The obligations of the debtor that survive completion of the Plan. In other words you have to pay the remaining balance on the debt. Home mortgage payments and vehicle payments when a debtor elects to retain such assets, alimony, child support, most student loans, debts arising from death or personal injury due to driving while intoxicated or under the influence of drugs; and debts for restitution or for a criminal fine. 

If a Chapter 13 Trustee or a creditor files an objection to the confirmation of a Plan with the Court, the Court schedules a hearing to determine if the proposed Plan complies with the law. The Plan must provide that all the debtor's projected net income will be paid to the Chapter 13 Trustee for the life of the plan. Net income is determined by applying the debtor's take-home pay against his monthly reasonable and necessary expenses.

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