This is true only if you qualify for a chapter 13. So, the question becomes whether or not a chapter 13 is right for you. Chapter 13 bankruptcy might be right for you if you are behind in your secured debt payments (like your house payment or your car payment), and you need to catch them up. Chapter 13 is also right for you if you make too much money to file a chapter 7 bankruptcy (a chapter 7 is a 100% liquidation of your unsecured debt with no repayment plan), or you need to buy unprotected equity in an asset (for example, if your house has more than $35,000 in equity). Finally, you can have too much debt to file for chapter 13. The rule is you can only have $1,081,400 in total secured debts (like mortgage and car loans), and $360,475 in total unsecured debt (like credit card debt). Please note these debt limit amounts are subject to change.
You might be wondering how chapter 13 works. (Check out our past blog on the difference between chapter 7 and chapter 13 bankruptcy). When your bankruptcy is filed it has to have a repayment plan included in it. That payment plan lasts for a minimum of 36 to a maximum of 60 months (3 to 5 years). During that period, you will make a payment to the chapter 13 office every month. The basic chapter 13 plan payment will include your chapter 13 administration fee, a percentage of the amount owed to your unsecured creditors (unless you qualify for a 0% repayment plan), and probably some of your attorney’s fee. It could also include your house or car payment (if you are behind on them), and a payment towards the amount you are behind on your house or car payment.
Now, does this mean you get to file for free? No, absolutely not. All it means is that your filing fee and your attorney’s fee will be paid through your chapter 13 repayment plan. If you are considering asking to have your attorney’s fee and your filing fee included in your chapter 13 payment you should be aware of how it will affect you:
- It will make your plan payment go up.
- It will probably extend the length of your plan.
- It will take longer for your creditors to begin getting paid because all attorney and administrative fees are paid first in your repayment plan.
- If you have to file a chapter 13 because you can’t file a chapter 7, you should know that chapter 13 can be more expensive to file in the long run.
Does this mean you should not ask your attorney about including your attorney’s fee and filing fees in your repayment plan? No, in fact, that may be your only option depending on your situation. If you can’t afford to file a chapter 7, a chapter 13 may be your only option. Again, as soon as you see that you are having financial difficulties, you should contact us for your free consultation. We will discuss your options with you and help you make the choice that is right for you.