Common Questions About Chapter 13 Bankruptcy

Many people think of bankruptcy as the final stop on the path to financial ruin. But even in bankruptcy, there is hope. Chapter 13 bankruptcy offers the closest thing to a soft landing for those seeking financial peace. Often referred to as the “wage earner’s bankruptcy,” Chapter 13 allows those with a certain amount of income to repay their debts at a lower cost.

Filing for bankruptcy is a major decision that comes with many questions. Littlefield Law Firm has answered some of the most common Chapter 13 bankruptcy questions for your convenience. Your best course of action, however, is to speak with a bankruptcy attorney who can help you decide if Chapter 13 bankruptcy is right for your financial situation. 

Bankruptcy Attorney in Dallas County

Consulting with a bankruptcy attorney is the best thing you can do before filing for Chapter 13 bankruptcy. Linda Littlefield is a proven bankruptcy attorney who will stop at nothing to help you achieve the financial freedom you deserve. Call (972) 812-0900 to schedule a time to speak with her.  

Littlefield Law Firm is based in Dallas County but also helps clients in areas such as Collin County, Kaufman County and Rockwall County.


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How Does Chapter 13 Bankruptcy Work?

Life has a way of throwing us curveballs. Whether it’s an illness, divorce, or job loss, everyone will experience rough patches at some point in their life. Anyone who has endured these situations knows how quickly bills and debt can pile up. Thankfully, Texas and the United States Government provide consumers and small business owners the opportunity to seek debt relief through Chapter 13 bankruptcy.

Chapter 13 bankruptcy is a federal proceeding that allows debtors to payback a portion or all of the debt through a court protected payment plan. No interest or penalties can occur while paying on this plan, but debtors are required to make monthly payments to a trustee. This repayment period can last for three or five years, depending on a debtor’s financial situation. Certain debts will be discharged once the debtor completes the plan. 

Only debtors with less than $419,275 in unsecured debts and less than $1,257,850 in secured debts can file for Chapter 13 bankruptcy. Unsecured debts, such as credit card balances and medical bills, are debts that are not backed by collateral. Secured debts, on the other hand, are backed by collateral and commonly include mortgages and auto loans.


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How Much of My Debt Will I Have to Repay?

Chapter 13 bankruptcy allows debtors to pay down certain debts in exchange for keeping their assets. How much a debtor is required to payback depends on the type of debt. Some are required to be paid off while others are not given precedence. All debts are generally divided into three different categories in a Chapter 13 payment plan: priority, secured and unsecured.

Listed below is a brief explanation of each debt:

  • Priority debts: Priority debts are non-dischargeable debts that are required to be paid off by the end of a repayment plan. Debtors will still be required to pay for such debts, even if they are granted discharge. Priority debts can include overdue taxes, child support and criminal fines. 
  • Secured debts: Like mentioned earlier, secured debts are debts that are backed by collateral like car loans and mortgages. Depending on the payment plan, debtors may be required to either pay for the full cost of the debt or pay back the value of the collateral.
  • Unsecured debts: Unsecured debts are not given top priority in Chapter 13 bankruptcy. In fact, it’s possible such debts will not be paid back by the end of the payment plan and they will likely be discharged. Unsecured debts are debts that are not backed by collateral such as medical bills, utilities and credit cards.

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Will Chapter 13 Save Me from Foreclosure?

Many people turn to bankruptcy when faced with foreclosure, and with good reason. Filing for Chapter 13 allows a debtor to take advantage of the automatic stay during the bankruptcy process. This statutory protection stops creditors from attempting to collect debts or enforce liens, such as foreclosing on a house.

The stay is automatically triggered once a debtor files for Chapter 13 bankruptcy. Once in effect, creditors will have to cease collection and foreclosure efforts. However, the automatic stay does not prevent debt collectors from collecting certain debts such as alimony, restitution from criminal proceedings and loans from a pension.

Filing and dismissing successive bankruptcy cases will affect how long the automatic stay will protect a debtor. An automatic stay will only be in effect for 30 days if a debtor has a bankruptcy case dismissed within the past year. Not only this, but debtors with two or more previous cases will not be able to benefit from the protection. 

Not all hope is lost if a debtor falls into these expectations. An attorney can file a motion asking the bankruptcy court to impose the automatic stay and stop foreclosure, but a debtor will have to prove their previous cases were not in bad faith.      


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Additional Resources

Chapter 13 | Bankruptcy Code – Follow the link provided to read the chapter of the Bankruptcy Code mandating Chapter 13. You can gain access to information about a trustee and their role, what must be included in a repayment plan and find out how discharge works. The statute can be read on the Legal Information Institute website, an online legal resource provided by Cornell Law School.

Chapter 13 Basics | United States Courts – visit the official website of the United States Courts to learn more about Chapter 13 bankruptcy. You can gain access to information such as the advantages of the process, what happens during a confirmation hearing and how discharge works. 


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Bankruptcy Lawyer in Dallas

Scrounging the internet for information about Chapter 13 bankruptcy will not do you any good. Get answers straight from the source and contact Littlefield Law Firm.  Linda Littlefield is a trusted advocate in the legal community. With nearly 25 years of experience, she is well prepared to assist you.

Call (972) 812-0900 to schedule a time to speak with Littlefield Law Firm. We assist clients with bankruptcy and related issues in areas such as Dallas, Plano, Kaufman and Rockwall. 


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