The following applies to individuals, not businesses:
After successful completion of a court-approved payment plan, a Chapter 13 Bankruptcy allows a debtor to discharge all of their dischargeable debts, and provides for the partial repayment of others (note that some debts, like child support, cannot be discharged). Chapter 13 is a form of debt consolidation, where your disposable income - determined by the court through "means testing" - is distributed to your creditors on a 3 to 5-year payment plan. All debts and liens not paid in the repayment plan are discharged upon the successful completion of the plan (subject to exceptions, like a mortgage lien, child support and spousal support debts, etc.). Some debts must be repaid in full, like alimony and child support; some debts you will likely want to repay in full, such as debts secured by liens (house, car, etc.) although you may be able to avoid paying parts of a secured claim on non-mortgage loan (called a "cramdown"); and unsecured debts will be repaid, if at all, based on how much disposable income you have available to repay them.
"Means testing" is used to prevent individuals with high incomes from avoiding paying their debts through bankruptcy. For example, a debtor is not subject to the means test at all if their income is below the state's median income. If it is above, then a calculation is done that factors the debtor's income and debts. A sufficient disposable income to make at least some repayment plan means that a debtor can use only Chapter 13, not Chapter 7.
There are advantages to a Chapter 13 over a Chapter 7 bankruptcy. For example, some debts that are not dischargeable in Chapter 7 are in a Chapter 13, such as tortious damage claims, untimely filed tax claims, marital settlement debts, and others. You don't have to surrender your non-exempt property in a Chapter 13 bankruptcy, as opposed to a Chapter 7. A Chapter 13 bankruptcy can also stop a foreclosure (but only while the case is pending).
Contact Us to discuss your situation and find out what your options are. It is free, there is no obligation, and we can speak over the phone.
Timeline of a typical Chapter 13 Bankruptcy, from filing to discharge
Most cases take 3 to 5 years to complete after filing. The timeline below assumes all information and documents submitted to the court and trustee are accurate and complete, and no objections are made by the trustee or your creditors.
Chapter 7 - Total discharge
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