Publication 5082: Chapter 13 Bankruptcy

This publication– Publication 5082, referred to as Pub. 5082, is provided by the Internal Revenue Service (IRS) to help you understand Chapter 13 bankruptcy.  Chapter 13, also known as a wage-earner plan, is a form of bankruptcy that allows individuals with regular income to create a repayment plan for their debts.

What is Chapter 13 Bankruptcy?

  • A voluntary reorganization of your debts under the supervision of the bankruptcy court.
  • Available to individuals with regular income, including wage earners, self-employed individuals, and sole proprietorships.
  • Requires you to develop a court-approved plan to repay all or a portion of your debts over a period of 3-5 years.
  • Offers a chance to catch up on missed payments and prevent creditors from foreclosing on your property or repossessing your car.

Who Should Consider Chapter 13 Bankruptcy?

  1. Individuals with regular income who are struggling to keep up with their debts.
  2. Those who want to save their home or vehicle from foreclosure or repossession.
  3. People seeking a structured plan to repay their debts over a set period.

Things to Consider Before Filing for Chapter 13 Bankruptcy

Cost: There are filing fees associated with Chapter 13 bankruptcy. You may also need to hire a bankruptcy attorney, which adds to the overall cost.

Credit Score Impact: Filing for bankruptcy will have a negative impact on your credit score for several years.

Commitment: Chapter 13 requires a commitment to your repayment plan for 3-5 years. Failure to comply with the plan can result in dismissal of your case or conversion to Chapter 7 bankruptcy (liquidation).

What Debts Can Be Discharged in Chapter 13?

Chapter 13 bankruptcy allows you to reorganize your repayment plan for most unsecured debts, such as credit card debt, medical bills, and personal loans. Certain debts, like child support, alimony, student loans, and most tax debts, are not dischargeable through Chapter 13 and must be repaid in full according to the court-approved plan.

Will I Lose My Property in Chapter 13?

No, Chapter 13 is designed to help you keep your property. The plan allows you to catch up on missed mortgage or car payments and prevent foreclosure or repossession.

How Much Does Chapter 13 Bankruptcy Cost?

The cost of filing for Chapter 13 bankruptcy varies depending on your location and the complexity of your case. There are filing fees associated with the bankruptcy court, and you may choose to hire a bankruptcy attorney for legal guidance.

How Long Does Chapter 13 Bankruptcy Take?

A typical Chapter 13 bankruptcy plan lasts for 3-5 years. During this time, you will make monthly payments to a court-appointed trustee who distributes the funds to your creditors according to the approved plan.

What Happens After I File for Chapter 13 Bankruptcy?

Once you file, the court will hold a meeting of creditors to review your case and repayment plan. If the plan is approved, you will begin making monthly payments to the trustee. The court will oversee your progress and discharge your debts upon successful completion of the plan.