What is Chapter 13?

Congress enacted Chapter 13 as a federal bankrptcy law to help individuals work themselves out of financial difficulties with a special plan to repay their bills.

Chapter 13: A Solution to Financial Problems

Chapter 13 Benefits:

• Your payments are carefully budgeted and are usually reduced.
• The court controls the cost.
• Creditors can no longer contact you or garnish your wages.
• Many creditors charges are usually stopped.
• You may save some money.
• Repossessions and foreclosures are usually stopped.
• Co-signers are usually protected.
• The court may reject invalid claims against you.
• Your savings and equity may be protected.
• Some unwanted contracts may be canceled.

Chapter 13 Plan

• Less Embarrassment
  A "light" version of bankruptcy, a Chapter 13 plan helps you pay your debts and avoid the stigma and problems accompanying a straight, or Chapter 7, bankruptcy.

• Reduced Payments to Fit a Budget
  Under a Chapter 13 Plan, you will often find that monthly payments are reduced because the court can extend your repayment period for up to 60 months.  You still make payments in an orderly way, but they are more likely to be payments you can afford.

• Help from the U.S. Bankruptcy Court
  You make all payments into a Chapter 13 plan with a U.S. Bankruptcy Court Trustee right here in El Paso.  This trustee makes certain your creditors receive the money and helps with financial problems that might come up during the repayment process.

• No Fee Surprises
  All costs, including your attorney's costs, are included in the payment schedule.  Only a small fee for filing a plan is needed to put the plan into effect.

How Chapter 13 Protects You

• Chapter 13 Stops Wage Deductions
  Once you file a Chapter 13 plan, creditors are under a restraining order.  They can no longer your employer or legally arrange to have your wages garnished.  Instead of contacting your employer, a creditor must now work through your bankruptcy trustee.

• Chapter 13 Stops Creditors from Calling
  The same restraining order that goes into effect when you file a Chapter 13 plan prevents creditors from trying to collect from you by telephone, in writing or by starting lawsuits against you.  You're instantly relieved from creditor harrassment because -- as long as you make your plan payments -- all collection contacts goes through your bankruptcy trustee.

• Chapter 13 Freezes or Reduces Interest Charges
  Most of your creditors can no longer charge you the same interest rates after you file a Chapter 13 plan.  Interest charges are either reduced or eliminated.

• Chapter 13 is Economical
  The amount you'll save in interest and creditors' charges will probably be more than what you pay for your costs to file a plan.

• Chapter 13 Can Usually Stop Repossession and Foreclosures
  Chapter 13 allows you to keep possession of most property, including your home.  In most cases, the Chapter 13 plan prevents creditors from trying to repossess your car or foreclose your home.

• Chapter 13 Propects Co-Signers
  If someone has co-signed on a debt with you, a Chapter 13 plan usually keeps creditors from being able to make collection attempts against your co-signer.

• Chapter 13 Rejects Invalid Claims
  The court may hold hearing regarding your debts, looking into them carefully, rejecting those that are unfair or unfounded.

• Chapter 13 Protects Equity and Savings
  A Chapter 13 plan can help you hold onto your savings and any equity you may have in real estate, stocks, bonds and insurance policies.

• Chapter 13 Cancels Unwanted Contracts
  The Court may investigate canceling unwanted or unnecessary contracts, such as when you've returned merchandise you've bought or when you may have discontinued services.

Why Chapter 13 Benefits Employers

Creditors are not allowed to bother you at work.
Many employers have noticed a positive difference after an indebted employee files a Chapter 13 plan such as:

• Improved Morale
• Less absenteeism
• Less employee turnover
• Good employees don't need to look for a second job or a different job in order to meet their obligations.

Why Chapter 13 Benefits Creditors

Creditors get Paid!
They collect payments on a regular schedule without any collection expenses, and they know a court-appointed trustee will give them fair treatment.

How to file a Chapter 13 Plan?

• Are you eligible?  
  You are if you file as an individual or as the owner of a small business, unless you're a stockbroker or commodity broker.
• Individuals
  If you make enough income to support a three- to five-year repayment plan and to cover a practical living budget, you can file for debt relief under Chapter 13 .
• Businesses
  As a small business owner you must owe no more than $339,000 in unsecured and $1,010,650 in secured debts in order to file a Chapter 13 plan.  You must be able to repay at least part of these debts within three to five years under your Chapter 13 plan.
• Filing a Plan
  You need the guidance of a lawyer to help you decide whether Chapter 13 is the right solution for you.  If it is, the attorney can prepare a plan, file it with the U.S. Bankruptcy Court to start Chapter 13's benefits working for you.