What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy allows individuals with regular income to reorganize debt through a court supervised repayment plan. Instead of eliminating debt immediately, this option gives debtors time to repay part or all of what they owe over three to five years.
Many Nevada residents in Las Vegas, Henderson, and Reno use Chapter 13 to stop foreclosure, prevent repossession, and regain financial stability. This approach helps protect important assets, such as a home or vehicle, while creating a manageable payment structure.
How Chapter 13 Works
Under Chapter 13, debtors make monthly payments based on income and expenses. These payments go to a bankruptcy trustee. The trustee distributes the funds to creditors according to a court approved plan.
Each case follows a unique plan. Some Nevada debtors only pay enough to catch up on mortgage or car loan arrears. Others repay a higher percentage of unsecured debt if their income allows it. Any qualifying unsecured debt left unpaid at the end of the plan is usually discharged.
Who Chapter 13 Helps Most
- You have fallen behind on your mortgage and want to avoid foreclosure
- You live in Las Vegas, Henderson, or Reno and need time to catch up on payments
- You earn steady income but need reduced monthly obligations
- You do not qualify for Chapter 7 due to income limits
- You want to protect nonexempt property from liquidation
- Your wages are currently being garnished
- You want to keep your vehicle and stop repossession
- You need extended repayment for certain tax or student loan debt
Chapter 13 Bankruptcy Eligibility in Nevada
Income and Debt Requirements
To qualify for Chapter 13 bankruptcy in Nevada, you must earn regular income. Your secured and unsecured debts must also fall within federal limits. The government updates these limits periodically. Current limits appear in the Bankruptcy Code debt limit guidelines.
Regular income includes more than wages. Self employment income, retirement benefits, Social Security, and pension income may qualify. Courts may also consider income from a non filing spouse.
Ability to Repay
You must show the court that you can cover reasonable living expenses while making monthly plan payments. These payments last between 36 and 60 months. Courts review budgets closely to confirm that the plan remains realistic.
The Chapter 13 Filing Process
Preparing and Filing the Case
The process begins with collecting financial records. These include pay stubs, tax returns, bank statements, and a full list of debts. A bankruptcy attorney then prepares the petition and repayment plan for filing.
Once the court receives the filing, the automatic stay takes effect. This action stops most collection efforts right away. Foreclosures, wage garnishments, lawsuits, and creditor calls must pause.
Comparing Other Options
Some debtors compare Chapter 13 with other forms of relief. You may find it helpful to review how Chapter 7 bankruptcy works before deciding which option fits your situation.
The Impact of Filing Chapter 13
Budget Oversight and Payment Rules
Chapter 13 places finances under court supervision. The court reviews income and expenses throughout the case. Payments may change if income increases or decreases.
Some courts require automatic wage deductions. Others require tax refunds to go toward plan payments. Debtors usually need court approval before taking on new debt during the case.
Credit and Long Term Effects
A Chapter 13 filing can remain on your credit report for up to ten years. Many Nevada debtors see improvement after completing the plan. Creditors often extend new credit once debts are discharged.
Benefits of Chapter 13 Bankruptcy
Protection and Flexibility
Chapter 13 works well for people who can afford regular payments but experienced a setback. Job loss, medical bills, or reduced income often trigger the need for relief.
This option allows debtors to catch up on missed mortgage payments, restructure car loans, and protect property. Unlike Chapter 7, Chapter 13 does not require liquidation of nonexempt assets.
Potential Drawbacks of Chapter 13
Time Commitment and Discipline
Chapter 13 requires a long term commitment. Most plans last several years. Debtors must follow a court approved budget during that time.
Missed payments can result in case dismissal. The bankruptcy filing also remains visible on credit reports for up to ten years.
Alternatives to Chapter 13 Bankruptcy
Chapter 13 does not fit every situation. Some debtors choose Chapter 7, debt consolidation, or debt settlement instead. Each option carries different risks and benefits based on income and assets.
Chapter 7 vs Chapter 13 Bankruptcy
Key Differences
Both Chapter 7 and Chapter 13 provide debt relief, but they serve different goals. Chapter 7 focuses on fast elimination of unsecured debt. Chapter 13 focuses on repayment and asset protection.
Typically faster debt relief for eligible filers
- Often completed in a few months
- Eliminates many dischargeable unsecured debts
- Best for limited disposable income
- May involve liquidation of nonexempt assets
- Less suited for catching up mortgage arrears
A repayment plan designed to protect assets
- Repayment plan lasting three to five years
- Can stop foreclosure and catch up on payments
- Helps prevent repossession and protect property
- Payments made through a trustee
- Remaining eligible unsecured debt may be discharged
Not sure which chapter fits your situation?
Choosing the right chapter depends on income, property, and long term goals. Schedule a confidential consultation through our secure intake form.
FAQs
How long does the process take?
The repayment plan in Chapter 13 typically lasts three to five years. There are options to convert the case to a chapter 7 at any time during the chapter 13 plan. Also, you can dismiss it if your circumstances change. Other options are to pay it off sooner, or to request a hardship discharge if your circumstances change for the worse during the plan term.
Can I keep my property if I file?
One of the key distinctions between chapter 13 and chapter 7 is that in Chapter 13 you are not required to turn over or liquidate any asset. In exchange for keeping property that might otherwise be nonexempt and liquidated in a Chapter 7 case, you are required to repay an amount equivalent to the nonexempt asset(s) in your Chapter 13. So yes, you can keep your property even if it is nonexempt.
Regarding property that is secured by a loan, like an automobile or home, in which you have defaulted on payments, yes, you can keep it free from foreclosure or repossession in chapter 13. One of the main purposes of Chapter 13 is to allow debtors to keep property secured by loans they have defaulted on, by proposing a repayment plan.
How often can I file for bankruptcy under this chapter?
It is possible to file multiple chapters without waiting between. However, if you completed and got a discharge in a prior chapter 13, you will not be eligible for a discharge unless the second case is filed more than two years from the date of the first discharge. The benefit to filing a chapter 13, even if you are not eligible for a discharge of any portion of your debts..is to get the protection of the Automatic Stay (prevents collection activities including foreclosure, lawsuits, repossession, harassment, etc), and to set up an extended payment plan.
If you want to file chapter 13 and be eligible to discharge any portion of your debts, you must wait two years from the date of your prior chapter 13 discharge to file your second case.
If you have a previous chapter 7 discharge, you can file chapter 13 four years later.