When you file for bankruptcy, you must decide under which chapter to file. Chapter 13 is one option that allows you to try to repay your debt instead of discharging it completely.
According to the U.S. Department of Justice, Chapter 13 provides you with some perks, such as protecting some of your assets that you would have to turn over to the court in a Chapter 7. There are a few other important points you will want to note if you are considering filing Chapter 13.
Must earn wages
People often refer to Chapter 13 as the wage earners plan. The reason behind this is that you must have an income to file under this chapter because you will have to create a repayment plan where you pay on your debts. Obviously, if you do not have a steady income, you will be unable to do the repayment plan.
Must file on all debts
It is essential to understand that you must include all of your debts in your bankruptcy paperwork when you file. If you fail to include a debt, it does not get bankruptcy protection. You also cannot include it in your repayment plan, and the court will not discharge it at the end of your case.
Must understand you may still lose assets
Once you file bankruptcy, the court issues an automatic stay. This remains in place until the court discharges your case, which will not happen until you finish your repayment plan. The automatic stay protects you against collections, so you can hold onto your assets.
The repayment plan also seeks to help you repay secured debts so that you can keep the assets. However, your repayment plan may not allow you to repay the full debt. The creditor still has claims to the assets you used to secure the loan. So, once the automatic stay lifts, your creditors can seize assets for debts you did not pay in full.