A Chapter 13 bankruptcy is a reorganization of your financial situation. You work with your Maryland bankruptcy attorney and the bankruptcy court to create an agreement to repay your creditors a certain amount during a certain time period. A Chapter 13 bankruptcy stays on your credit report for less time than other filings, so you can rebuild your credit score more quickly.
The main purpose of a Chapter 13 bankruptcy is to enable you to retain certain assets that would otherwise be liquidated in a Chapter 7 bankruptcy. Under either a Chapter 7 or Chapter 13 filing, you would keep your home and car, but under a Chapter 13, you would also be able to keep your rental properties, collections.
Under a Chapter 13 bankruptcy filing, any co-signers to loans you have obtained are afforded protection under the Co-signer Stay. This means that the creditors cannot attempt to collect on the debt from either your or your co-signer once you have filed for bankruptcy. Once your bankruptcy has been resolved and closed or dismissed or even reassigned as a different type of bankruptcy, then the creditors are able to attempt to obtain repayment of their debts from the co-signer.
In order to file a Chapter 13 bankruptcy, you must have a regular income and owe less than $250,000 in unsecured debt and less than $750,000 in secured debt. The debts must be for a certain, fixed amount and not subject to any conditions. You may be able to discharge certain debts under a Chapter 13 filing that would be non-dischargeable under other filings. Your payments would be reduced so that you would have the opportunity to repay your debts over a certain period of time.
Your payment plan is determined by the amount you can afford after your necessary living expenses have been determined. The plan generally lasts for 36 months, unless you request additional time to pay. The payment plan will not last longer than 60 months. At the end of the term, your unsecured debts would be discharged, regardless of how much your creditors have received. Your secured debts must be repaid in full.
You must also stay current with your ongoing obligations, including your mortgage. The Chapter 13 filing only affects those debts that you owed on or before you file for bankruptcy. Any arrearages that existed are paid over the term of your payment plan.