Jefferson Hanna Law
Jefferson Hanna Law

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Chapter 13 bankruptcy is a common form of bankruptcy that allows debtors to set up a payment plan in order to pay off all or part of their debt from their future income. It is usually most helpful or debtors who will have a guaranteed way to pay for future installments with their income, but who have gotten behind on their arrears or other debts. It is also helpful for people who want to file for individual bankruptcy, but cannot qualify for a Chapter 7 Bankruptcy due to their income level, as well as people who want to protect assets or equity that would not be exempt under a Chapter 7 Bankruptcy.

This payment plan, which usually spans 3-5 years, can be developed with the help of a skilled attorney. If a plan meets all of the necessary requirements as set out in the Bankruptcy Code, it will be confirmed by a Judge and set into motion. Then, a debtor simply has to focus on meeting their payments by the agreed-upon time.

Unlike a Chapter 7 Bankruptcy, a Chapter 13 Bankruptcy does not involve the automatic liquidation of non-exempt assets to pay back your creditors. This means that Chapter 13 bankruptcies are especially helpful for people who have valuable, non-exempt property that they want to keep (which would not be possible in a Chapter 7 bankruptcy). They are also helpful in:

  • Preventing house foreclosures
  • Preventing car repossessions and making up missed car payments
  • Helping debtors to catch up on mortgage payments
  • Paying back taxes, and/or preventing interest from accruing on your local, Connecticut State, or Federal tax debt

The exact terms of a Chapter 13 bankruptcy—including the amounts to be paid over time—vary on a case-by-case basis. They are largely based on factors such as your income when compared to your expenses (i.e., your “disposable income”). One common requirement of a Chapter 13 bankruptcy is that the amount to be paid back over time must be equal to or greater than the liquidated worth of a person’s non-exempt assets.

Chapter 13 is the second most common form of bankruptcy in Connecticut, second to Chapter 7. There are several important differences between those two types of bankruptcy, but they mainly involve the “end goal” of the bankruptcy process, as well as the means by which those goals are reached.

Chapter 7 is a “liquidation bankruptcy”. It liquidates a person’s assets and properties (with the exception of “exempt” assets and properties) to pay a person’s creditors. In return, it “discharges” all non-secured debts, giving the person a financial fresh start.

Chapter 13, on the other hand, is a “reorganization bankruptcy.” It allows a person to reorganize their debt such that they have a chance to catch their breath and make up payments they had fallen behind on.

Are you considering Chapter 13 Bankruptcy in Middletown, Connecticut? Attorney Jefferson Hanna is here to help. Call (860) 265-4600 for a consultation on your case today.

Jefferson Hanna, III

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