Top Reasons for Filing A Chapter 13 Bankruptcy

1. The most common reason for filing a chapter 13 bankruptcy under the law change of 2005 is that the clients income exceeds the median income for where they live. This is in reference to the means test portion of the bankruptcy petition. This determines what type of bankruptcy you will be eligible for. The advantage of this type of bankruptcy is that it allows a repayment schedule with one monthly payment to take care of all of your unsecured debt, and can also include car payments.

2. Chapter 13 bankruptcy allows a person to discharge all of their remaining debt after they repay the debt for three or five years. This means that you make a set payment each month, and unless you are doing a 100% plan you will only pay back a portion of your debt. This amount is determined by your budget, and you are required to put all of your disposable income towards the plan.

3. Chapter 13 bankruptcy can allow an individual to keep their home from going into foreclosure. If you are behind on your house payments in Minnesota a chapter 13 may allow you to catch up on your past due house payments and prevent a sheriffs sale. The catch is that you need to be able to make your full mortgage payment, and pay something to catch up on the past due payments.

4. It may be possible to strip off 2nd mortgages that are totally unsecured. This never used to be the case in Minnesota, but a recent court decision makes this option a possibility for the many Minnesotans who have houses with a 2nd mortgage that they cannot afford. This decision was recent and could still be appealed to the 8th Circuit Court of Appeals.

5. If your car loan is over 910 days old you may be able to cram down the value of the car to what the vehicle is actually worth. This allows you to make a smaller car payment and have the vehicle paid off at the end of your chapter 13 plan. It also allows you to make a larger payments to your unsecured creditors.

6. You can schedule certain debts as priority. If you have certain debts that would not be dischargeable in a chapter 7 bankruptcy, you can make payments on those debts in a chapter 13 bankruptcy. This allows you to set up a fair payment plan and pay your priority debts, and at the end of the three or five your repayment term, also get rid of your unsecured debt. This is a huge advantage if you owned a business in Minnesota and owe sales or use taxes, or other priority government debt.

7. If you are working and can contribute to a 401k you are allowed to do this in a chapter 13 bankruptcy. This means that you are saving for your retirement and paying off your debt at the same time. This is a great option for clients, since they can exit bankruptcy with more money for their long term retirement needs.

8. The above list does not include all the possible benefits of filing a chapter 13 bankruptcy. If you have more questions you can give our office a call at 952-294-0144 and we would be happy to see if chapter 13 bankruptcy in Minnesota is a good option for you.