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:
- 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.
- Repossession: A debtor may seek to save a vehicle from repossession or obtain the return of a repossessed vehicle.
- 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.
- 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.
- 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.