Keep Your Home by Filing Chapter 13


Many people consider bankruptcy taboo despite the frequency in which Americans file for bankruptcy each year. Bankruptcy is anything but taboo. In fact, bankruptcy is quite the opposite—it is an alternative that allows filers to repay creditors while improving their financial well-being. Nearly 820,000 individuals and businesses filed for bankruptcy protection in 2015. Of those nearly 820,000 filings, slightly more than 277,000 were Chapter 13 filings.

What is Chapter 13?

Chapter 13 of the Federal Bankruptcy code is intended for individuals and not for businesses. Specifically, Chapter 13 helps filers reorganize financial affairs using a repayment plan they must complete within three to five years.

Individual filers must qualify to file for Chapter 13 protections. Individual filers must demonstrate that they earn a level of income that will allow them to repay their debts. The bankruptcy court may not allow people to file under Chapter 13 if they earn irregular or low incomes.

People with money issues are often frightened that filing for bankruptcy will cause them to lose their homes and assets. In fact, Chapter 13 protections may allow an individual filer to keep a home.

An individual filing for Chapter 13 bankruptcy must make all required payments designated by a court-approved repayment plan. The filer’s income will determine whether the repayment plan is for three or five years. The filer will make payments on her mortgage while also paying off late or unpaid mortgage payments (“arrearage”). If the filer successfully makes all payments throughout the duration of the repayment plan, she will avoid foreclosure and keep her home!

Filing for Chapter 13 helps halt foreclosure proceedings. The bankruptcy court will issue an automatic stay as soon as the filer submits the bankruptcy petition. The automatic stay remains in effect until the court approves the repayment plan.

Why Not Chapter 7?

Many people who are considering filing for bankruptcy wonder why they can’t file for Chapter 7 instead of Chapter 13. In a Chapter 7 bankruptcy, debts can be discharged without the debtor having to enter into a payment plan, which initially seems like a better situation for most filers. However, before granting a discharge, the court will seize all of a debtor’s non-exempt assets and sell them to pay off creditors. This can include a person’s home if the amount of equity they have exceeds the homestead exemption available in their state (which is $30,000 in Utah). As a result, for many homeowners, Chapter 7 would result in losing their homes—making Chapter 13 a more attractive option.

Call JLT Law Today to Speak to an SLC Bankruptcy Lawyer

Chapter 13 bankruptcy protections may allow an individual filer to keep a home. However, filing for bankruptcy may not always be the right choice. If you are considering filing for Chapter 13 bankruptcy, you should first discuss your financial situation with an experienced bankruptcy attorney. At JLT Law, we will evaluate your financial situation and your objective to advise you as to whether bankruptcy is your best alternative. Schedule your consultation by calling (801) 797-2098 today, or by sending us an email through our online contact form.