Chapter 13 bankruptcy, also known as a wage earner's plan, allows Tacoma residents with a steady income the chance to reorganize debts and repay them over time. Unlike Chapter 7 bankruptcy, which will eliminate most of your debt, Chapter 13 provides a structured repayment plan that spans over three to five years. This lets you keep your assets, like your home and car, while managing your financial obligations under court supervision.
A skilled Tacoma bankruptcy attorney can help you decide whether bankruptcy is the right fit for your situation. They will assess your financial position and assist you in determining which type to file.
Who Qualifies for Chapter 13 Bankruptcy in Tacoma?To file for Chapter 13 bankruptcy in Tacoma, you need to meet a set of specific eligibility criteria:
Before filing, you’ll need to gather:
Under federal law, you will have to complete credit counseling from a government-approved agency within 180 days before you file.
Step 3: File the Bankruptcy PetitionTo officially begin the process, your bankruptcy attorney will file:
Once filed, the automatic stay (11 U.S. Code § 362) goes into effect. This immediately stops all creditor harassment, wage garnishment, foreclosure, and collection efforts and stays in place for the duration of your bankruptcy proceedings.
Step 4: The Repayment PlanYour proposed Chapter 13 repayment plan outlines how you will repay your debts over three to five years. You will not make payments directly to the creditors. Instead, you will make your payments to a court-appointed trustee, who will distribute the funds to your creditors.
The plan must:
The amount you pay depends on:
About 30-45 days after you file, a bankruptcy judge will review your repayment plan in a confirmation hearing. If approved, you’ll start making payments.
Step 6: Completing the PlanAs long as you follow the repayment schedule and don’t miss your payments, you’ll be on track for debt discharge after you complete the plan.
Debts Covered Under Chapter 13Chapter 13 bankruptcy helps manage different types of debts:
Chapter 13 in Washington State follows the federal bankruptcy laws outlined in the US Bankruptcy Code. However, there are state-specific exemptions you can take advantage of to protect your assets.
Your Tacoma bankruptcy attorney can explain these exemptions to you in more depth so you can be sure to maximize them.
FAQs About Chapter 13 Bankruptcy in Tacoma, WashingtonIt will remain on your credit report for seven years from the filing date.
Yes. If your income decreases, you can request a plan modification through the court.
If you miss payments, it can result in a case dismissal. However, the court may allow a modified plan in certain situations.
Yes, it is possible to do so, but you will need to get approval from the court and be able to show financial stability.
While it isn’t legally required, working with an experienced attorney in Tacoma is highly recommended.
Filing for bankruptcy can be a complex process that requires accurate paperwork and a well-structured repayment plan. A Tacoma bankruptcy attorney can assess your eligibility and explain your options, help draft and file all the necessary documents, represent you in court, and negotiate with creditors on your behalf.
Chapter 13 bankruptcy is a good way for you to regain financial control while still being able to keep your property. If you find yourself struggling with debt in Tacoma, our bankruptcy attorneys can help ensure a more successful filing.
If you make more than the median, or average, income for your household size and state, you may be forced to file a Chapter 13 repayment plan. A means test determines whether you have to be in a Chapter 13.
In some cases, you may want to file a Chapter 13 because it can accomplish the goals you seek. A Chapter 13 can help you catch up on a mortgage and save your house from foreclosure. It can consolidate a car loan, tax debt, and back child support all into one consolidation plan. Often you can pay back these important debts and pay pennies on the dollar, sometimes 0%, on “general unsecured debt” which is debt like credit cards, pay day loans or medical debt. You can also strip a second mortgage off a home if the value of the home is less than the balance of the first mortgage. This second mortgage is paid the same percentage as the other “general unsecured debt”.
The percentage paid to general unsecured debt is determined by your ability to pay. The means test takes the average of your last six months of income and deducts payments on secured debt, such as mortgages, back mortgage payments if any, car payments, etc. The test also deducts “priority debt” payment, such as back taxes or back domestic support obligations like child support. It subtracts other actual expenses like health insurance, day care and current taxes, and other expenses limited by law, such as rent, food and transportation. Whatever is left after these deductions is the amount you pay to unsecured creditors. If you have $250 left, then you pay $15,000 over 60 months or five years. If your total unsecured debt is $60,000, then you are in what is called a 25% plan. All unsecured creditors have to be treated the same and get 25% of the claim they file with the bankruptcy court. The claim doesn’t include ongoing interest or late charges.
Chapter 13 and Your DebtUnfortunately, some debt you can not discharge like fines or student loans have to be paid the same percentage as other debt like credit cards. If you pay only 25% of your student loan, 75% is still owed at the end of the plan. However, some judges will allow you to pay on your student loans if your other unsecured creditors would have received nothing in the plan anyway.
Even if you have to pay 100% of your general unsecured debt, a Chapter 13 is often better than struggling to pay debt outside of bankruptcy. This is especially true if you are facing a garnishment because only one creditor can garnish at a time and they can take 25% of your take home pay. Creditors file claims that are limited to the amount owed at the time of filing, so a Chapter 13 stops interest and late charges.
The case starts by filing a petition, lists of debt, property, income and a budget along with a means test and a debt payment plan. As soon as the case is filed, all debt collection stops. You can file a petition without the other documents in an emergency but the balance of the documents must be filed within two weeks. About a month after you file, you have to attend a meeting of creditors. Creditors rarely appear. You meet the trustee who asks you questions under oath after examining your bankruptcy documents and plan. The trustee could have some recommendations for changes and could file an objection in bankruptcy court. Creditors also have an opportunity to file objections. The objections, if any, are heard by a bankruptcy judge who decides whether to confirm the bankruptcy plan.
Once the plan is confirmed, you keep making payments to the trustee for three to five years. After the plan completes, whatever debt is not paid in the plan is discharged as long as it is dischargeable. If you are paying off a car, you get the title at the end of the plan. Mortgage arrears, back taxes and back child support are caught up by the end of the plan. Unlike a Chapter 7, if you were ordered to pay an ex spouses credit card or other marital debt, the Chapter 13 totally wipes out any obligation to pay this debt.
Though you have to complete a payment plan before you get a fresh start in a Chapter 13, this kind of bankruptcy can accomplish more than a Chapter 7. It is often more secure and predictable than other bill consolidation plans.
If you have more questions about a Chapter 13 bankruptcy, contact the experienced bankruptcy lawyers at Washington State Attorneys.