The bankruptcy group at Perrotta & Cahn is committed to helping clients in northwest Georgia overcome debt, foreclosure and other financial difficulties. Here, we answer some frequently asked questions about Chapter 13 bankruptcy.

Chapter 13 bankruptcy is a full or partial repayment plan administered by the bankruptcy court. The debtor submits a plan for approval, and when the plan is approved, makes monthly payments to the bankruptcy trustee. The trustee then makes payments to creditors in accordance with the terms of the plan. At the end of the repayment period, which may be from three to five years, any remaining unsecured, dischargeable debt may be discharged if all payments have been made according to the plan.

In one sense, it is easier to qualify for Chapter 13 bankruptcy than for Chapter 7. There is no means test for Chapter 13 bankruptcy and some debtors who cannot qualify for Chapter 7 bankruptcy opt to file under Chapter 13 instead. However, Chapter 13 bankruptcy requires a regular income that will allow you to create a budget and make predictable and reliable payments to the trustee. For more information about eligibility for Chapter 7, please see our Chapter 7 bankruptcy questions.

The answer to this question depends on your situation. In many cases people who file for Chapter 13 bankruptcy have accumulated a large amount of debt, but still have a steady income, as well as property that they do not want to lose. Rather than liquidating assets, filing for Chapter 13 allows debtors to negotiate new, more manageable payment terms with creditors, so that they may pay off debt in a specified period of time. Chapter 13 is also a good option for those with obligations that cannot be discharged under Chapter 7, such as child support and student loans.

The fact that you have declared bankruptcy will remain on your credit report for seven years. While this will not necessarily prevent you from being able to obtain new credit, potential creditors will take it into consideration. Additionally, while you are in Chapter 13, you must obtain approval from the court before you incur new debt.

Chapter 13 can help in many debt situations, but it may be especially effective for people with significant income tax debt. In fact, debts meeting the following criteria will be discharged:

  • The debt must be from a tax return whose due date was at least three years before the bankruptcy filing
  • You must have filed the tax return at least two years before the bankruptcy filing
  • The taxes were not assessed within the 240 days before the filing
  • You are not guilty of tax evasion and have not committed any fraud or misrepresentation

Rules governing the tax implications of declaring Chapter 13 can be complex, but an experienced bankruptcy attorney can advise you on your rights, obligations and any other exceptions that may apply.

If you think Chapter 13 bankruptcy may be a good way for you to take control of your debt situation, please contact Perrotta & Cahn to schedule a free initial consultation. We have offices in Cartersville, Calhoun, Dalton and Dallas, making us one of the most accessible law firms in northwest Georgia.