### An Overview of Chapter 13

**Video Transcribed: **Edward Kelley from 188 Debt Line, answering your bankruptcy questions. So today we’re going to do two new things. One, start a series on Chapter 13, and two, I’m going to try to record this while I’m driving. So, I’m looking at my phone. It looks a little bouncy. Let’s hope it’s not too distracting.

Okay, Chapter 13. Well, let’s start with what it isn’t.. A Chapter 7. So we’ve talked about Chapter 7 a lot in previous videos. Chapter 7 is what you call liquidation. So you hold on to your exempt assets, like your home and cars, your personal belongings, but you liquidate any non-exempt assets. Most people don’t have any, but if you did, like a boat, royalties or the like, those get taken, sold, and the proceeds distributed to your creditors, exchange. All of your debt gets wiped out in it’s entirety, other than things like student loans, child support, certain criminal penalties.

So, what’s the difference with the Chapter 13? Well, you get some very powerful tools that you don’t get in a Chapter 7, and you have to pay for five years. So, let’s just do a brief overview in this first video, what is a Chapter 13?

So, Chapter 13, you can think of it as a fresh start for someone who is either behind on their mortgage, or their vehicle payments, and needs a way to catch them up. Or for somebody who simply makes too much money to do a Chapter 7. The real difference is, the Chapter 7 you’re presumed not to have enough income to make any kind of payments toward your debt. In a Chapter 13, most cases you’re presumed to have that pay. So the math calculation in a 7, that results in what’s called your disposable income, generally isn’t supposed to leave you more than a hundred bucks or so, a month.

But if you get much above that, and you file a 7, you may end up being forcefully requested to convert that case to a Chapter 13. So Chapter 13; Let’s say you have $300 bucks a month leftover. So, that’s a calculation that we present to the court, hoping that they will agree. We take all of your expenses, from all of your income, and whatever’s leftover is your disposable income. You pay that amount for five years, and then any remaining debt is going to be discharged.

So let’s say you have $60,000 in debt, and you pay… Your disposable income is $500 a month. And again, the most important thing to remember is, your payment in a Chapter 13, which I propose on your behalf, is not based on what you owe in any way. Only based on what you can pay. With some… Of course, there’s always some exceptions.

But let’s say we come up with a disposable income of $500 per month. So then I propose a Chapter 13 plan, which is an important concept. This is basically your plan to address your debts, over the five years that you’ll be in the Chapter 13. If you’re going to pay $500, and you have $60,000 in debt. When you take 60 months… 60 months is how many months there are five years… Times that $500, you’ll end up with 30,000. So, you’re paying about half the debt. If those numbers were made, if those numbers are accurate, at the end, you’re going to discharge $30,000. So, that’s your basic Chapter 13 bankruptcy.

Next week we’re going to talk about when your Chapter 13 can be a three year plan, and about saving your house, your car, through a Chapter 13. Again, I hope this wasn’t too bouncy. We’ll see how this works. Thanks. Talk to you soon. From 188 Debt Line.