Why FIle Under Chapter 13 Bankruptcy, Terry Bankert Flint Bankruptcy Attorney 235-1970

Why File Under Chapter 13?

§2.2   Although a debtor who is said to “fail” the means test for Chapter 7 is presumed to be a candidate for Chapter 13, most filers do not seek Chapter 13 protection for that reason. The most common reasons for filing under Chapter 13 are the following:

1. Foreclosure: The majority of Chapter 13 filers are homeowners who are behind in their mortgage payments and seek to stop foreclosure and cure outstanding mortgage arrearages.
2. Repossession: A debtor may seek to save a vehicle from repossession or obtain the return of a repossessed vehicle.
3. Nonexempt assets: A debtor with equity in real property or personal property has the option under Chapter 13 to offer payment to creditors equal to dividends that the creditor would receive from a Chapter 7 trustee.
4. Tax and child support debt: Debtors with substantial priority debt such as taxes and child support can provide for repayment of that debt while reducing the amount of payments to other general unsecured debt.
5. Excess disposable income: After reviewing the debtor’s income and expenses after payment of ongoing obligations and household expenses, there may be sufficient funds available on a monthly basis to pay unsecured debts over time.

Determining the client’s objectives and assessing his or her ability to make regular payments to a Chapter 13 plan while maintaining regular household expenses will guide appropriate counseling of bankruptcy options.

Once a determination is made that the client would benefit from the protection of Chapter 13, it must be determined whether the client qualifies for Chapter 13 relief and discharge.