Chapter 13 Bankruptcy

 Chapter 13 is often referred to as the reorganization bankruptcy.  

Chapter 13 stops repossessions and foreclosures while  eliminating unsecured debts such as credit cards and medical bills.   However, certain unsecured debts such as taxes, child support and  student loans are not dischargable in bankruptcy. 

Chapter 13 is a monthly payment plan that allows the debtor to  reorganize past due house payments and automobile payments.  Chapter 13  is also an effective tool to repay past due taxes and child support.

Chapter 13 does allow the debtor to continue to pay on secured debts  such as house payments and car payments.  In fact, retaining the secured  debt is mandatory if the debtor wishes to retain the property securing  the debt.  If the debtor is willing to "surrender" the collateral, they  can eliminate the secured debt.

In  most bankruptcy cases, all the assets of the debtor(s) are exempt.   "Exempt" means the assets are protected.  Exemptions vary from state to  state.  Both Texas and Arkansas offer a fairly generous list of  exemptions.  Keep in mind, an exemption does not avoid a secured debt.

Being over median income could force a debtor to file a Chapter 13  bankruptcy.  In this instance a debtor is forced to repay a portion of  their unsecured debts.