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Sept. 18, 2017

Chapter 13 bankruptcy is one of the most common tools for people to relieve their debt burden and set themselves up for a better financial future.

The following are a few of the most common questions our bankruptcy attorneys receive about filing for Chapter 13:

Q: How much debt do I have to repay under Chapter 13 bankruptcy?

This depends mostly on the types of debt you owe. You must pay all your bankruptcy filing fees, trustee commissions and attorney’s fees. There are also certain debts for which you cannot escape responsibility, including child and spousal support, most tax debts (except any due three years or more before filing), payment owed to employees, contributions to employee benefit funds and student loan debts (unless you’re able to prove undue hardship).

If you wish to keep your vehicle or home, you must pay the entire amount you are behind on the loan, along with any debt secured because of tax liens. Unsecured debts, however, vary from case to case. You could be responsible for anywhere from all the money owed to none of it, depending on the length of your repayment plan, your disposable income and the amount of money your creditors would have received had you filed for Chapter 7 bankruptcy instead.

Q: Can I keep my home in Chapter 13 bankruptcy?

Yes, Chapter 13 bankruptcy allows you to keep your home so long as you have enough income to meet your mortgage payments during your repayment plan. An automatic stay goes into effect as soon as you file for Chapter 13 bankruptcy, stopping the foreclosure process until your plan has been approved by the court. At that point, your lender must act in accordance with the plan and accept payments as planned over the course of your repayment period.

Q: How long can I expect my repayment plan to last?

This depends on the total amount of money you owe. A good rule of thumb is to expect your repayment plan to last from three to five years. If you make all required payments in this plan on time, you will be able to keep your property and stay on schedule.

Q: Am I allowed to use retirement benefits to pay my repayment plan?

Part of arranging a Chapter 13 repayment plan is proving to the court that you have enough income to meet your financial obligations in your repayment plan. Courts generally allow debtors to use money earned from a wide variety of sources, including retirement benefits, to make these payments.

Q: Can Chapter 13 bankruptcy help get me relief from my tax debts?

One of the advantages of Chapter 13 bankruptcy versus Chapter 7 is your ability to manage your debts. While you are not able to eliminate your responsibility for your tax debts, you can stretch out the payments over a much longer period than you would through Chapter 7.

If you have any additional questions related to Chapter 13 bankruptcy, consult a skilled Texas bankruptcy attorney with Marcos D. Oliva, P.C.