Chapter 13 Bankruptcy FAQ

What is Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy in Florida is a court-supervised payment plan where you pay all your creditors monthly based on your income and reasonable expenses.

In order to qualify for a chapter 13 bankruptcy in Florida, you must have enough income to pay your creditors and any past due payments you may have.

A chapter 13 bankruptcy permits debtors to modify or eliminate some secured debts.

Why not file for Chapter 7 instead?

There are several reasons, including not wanting to liquidate all your assets. But the most common is salaried wage earners that just make to much money to qualify for a chapter 7.

Another reason is to stop a foreclosure. A chapter 13 bankruptcy will allow you to catch up on past due mortgage payments. Second mortgage liens can be eliminated with a successful chapter 13.

What is a Trustee?

A chapter 13 trustee’s job is to the approval of your repayment plan. The Chapter 13 trustee collects the debtor’s plan payments and distributes the money among the debtor’s creditors pursuant to the terms of the approved Chapter 13 plan.

What is “Automatic Stay”?

When you file for Chapter 13 bankruptcy an “automatic stay” goes into effect. This “automatic stay” automatically stops most creditors and debt collectors from trying to collect what you owe them. While not a permanent solution, this stay goes into effect for the duration of the court filing, giving you temporary relief from creditors trying to garnish your wages, bank account, or other assets.

The bankruptcy judge will not lift the stay if you are a defendant in a foreclosure proceeding as long as you are making mortgage payments through your Chapter 13 plan.

How much will I have to pay?

Some of your creditors will receive 100% of what you owe them, while others may receive a much smaller percentage or nothing at all.

Any “priority” debts must be paid and to date in full:

• In order to keep your house, your mortgage payments must up to date.
• Child support and alimony must be paid and up to date.
• State and Federal taxes.
• Any wages or benefits that you owe your employees.

Unsecured debts will be paid anywhere from 0% to 100% of what you owe. The exact amount depends on the value of any nonexempt property you own, the amount of “disposable income” you have to pay your debts, and the duration of your chapter 13 repayment plan.

What qualifies as disposable income?

The payment plan that is drafted by your attorney shows your income minus your allowed expenses and payments on secured loans (like your mortgage). Whatever is leftover is your considered disposable income.

How long will the payment plan last?

The duration of the payment plan depends on the median monthly income of a household of your size and state.

If you make equal or more than the median, your plan can last 5 years or more. If your income is less than the median, your plan can be for as little as 3 years, even if this does not fully repay all of your creditors.

Can I still file for chapter 7 after chapter 13?

Depending on the circumstances you can. I prime example is a person that filed for chapter 13 because of high wages, but was later laid off and can no longer make the plan payments.

This can be a complicated situation, so please consult with your attorney first!

Can I sell my house in chapter 13?

The short answer is yes, but there are strings attached. First and foremost you should sell anything unless the Trustee is informed and the trustee approves what you are trying to do.

Please ask your attorney about this first. Anything you do wrong can void your chapter 13 plan and cause even greater financial woes.