Chapter 13 Is a Personal Reorganization
Video Transcribed: This is Edward Kelley bankruptcy attorney in Oklahoma answering your bankruptcy questions. We’re finishing up our five-part series on Chapter 13. Just to summarize, first, we talked about what’s the difference between Oklahoma Chapter 7 and Chapter 13. Chapter Seven in short is a liquidation. Give up your assets, that means non-exempt assets, and get all your debts discharged or taken away.
Your home, your vehicle up to $7,500 in value, all your personal belongings, all that’s exempt, so that’s not anything you have to worry about. Seven is what you want to do if you can if you don’t have collateral on some of those loans that you want to keep.
An Oklahoma Chapter 13 is a personal reorganization. You’re going to pay in for three to five years, 36-60 months what you can, not what you owe. So, it’s still based on your income, not on the debts. At the end of that three to five-year plan, then everything is discharged and gone.
Then I talked about why would you do a 13? Well, if you make too much to do a Chapter Seven, there are income cut-offs, or if you have done Chapter Seven within the last eight years you may have to do a 13.
I also talked about in that case, if you would normally qualify for a seven, you get to do the short Chapter 13. You still have to pay what you can monthly, but you can do that for 36 months instead of 60. Three years instead of five, which is great.
Why else would you do Chapter 13? Like you’re trying to save your house or your vehicle that you’re behind on, and you want to force the bank to let you catch up. You can do that in a 13. Or if you want to cram down your interest rate or the value of your vehicle.
I talked about how the old $15,000.00 on $5,000.00 valued car if you didn’t buy the car within the last two to three years, you can actually just pay back the $5,000.00 and keep the car rather than the $15,000.00. You bought it recently, you can’t get away with that.
In any case, you can cram down the interest rate to a prevailing good market rate regardless of what you started out with, another reason you might want to do a 13. Just to summarize overall, 13, if you make too much to do a seven you could still end up discharging a significant amount of your debts.
Even if you don’t discharge any, you can make the trustee handle it all, and nobody can sue you, nobody can garnish you, nobody can touch you. You’ve got one payment going out to the trustee for the life of the plan, and it could give you a lot of peace of mind. At the end of the plan, it’s all discharged like in a seven.
Or you can keep a house that you years behind on, or a vehicle that you are way behind on. You don’t have to deal with crazy loan modifications or repos. You’re protected by the Bankruptcy Court, and at the end of it, you are done. So, hopefully, this has been helpful on what Chapter 13 is and why you would do it, and how it works.