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What Happens to My Property If I File for Chapter 13?

Law Office of Jason Cline March 21, 2022

Bankruptcy Petition Declaring bankruptcy is a difficult choice to make and one that should not be taken lightly, even when you have several bankruptcy options available. Among these options is Chapter 13 bankruptcy, also referred to as the “wage earner’s plan.” While Chapter 13 provides you with the flexibility of a payment plan, you may still have questions about what happens to your property.

My firm, The Law Office of Jason Cline, is committed to providing knowledgeable legal counsel and reliable advocacy to individuals facing complex financial problems. From my Albuquerque, New Mexico office, I proudly serve clients throughout the state of New Mexico, including Santa Fe, Rio Rancho, and Los Lunas. As a bankruptcy attorney, I’m here to help you understand how Chapter 13 bankruptcy works, and guide you through the process from start to finish.  

Overview of Chapter 13 Bankruptcy 

Chapter 13 bankruptcy, sometimes referred to as reorganization or wage earners bankruptcy, allows you to set up a repayment plan that spans over a period of three to five years depending on your circumstances and where you fall on the means test threshold. Once a plan is established, it must be sent to the court for approval. Chapter 13 bankruptcy may be an option for individuals with reliable income as a means of paying down their creditors under an approved plan over time in a manageable way.

What Happens to Your Property?

A major benefit of Chapter 13 bankruptcy is that you get to keep possession of a good amount of your property. Still, the tradeoff is that you will need to make payments on the property as you build back your finances.  

The Chapter 13 process begins by filing a petition in which you disclose to a court the following:

  • a schedule of assets and liabilities

  • a schedule of current income and expenditures

  • a schedule of executory contracts and unexpired leases

  • a statement of financial affairs 

Once that is established, you can move on to your property, or “assets.” In Chapter 13 bankruptcy, assets are divided into two categories: exempt and nonexempt.

  • Exempt assets are ones that can be protected, such as a house, car, or retirement accounts. Exempt assets allow you to protect your property as you move through the repayment plan.

  • Nonexempt assets are ones that cannot be protected by exemptions. They usually include “luxury” items like vacation homes, expensive cars, investments, or valuables like jewelry and artwork.

When is Chapter 13 a Good Option?

A great option for those who want a fresh start financially, Chapter 13 bankruptcy utilizes a designated trustee to handle your financial matters. While it usually takes at least five years to completely discharge debt under Chapter 13, you will be able to breathe a bit easier knowing you will not have to sell your house or your car to repay your debt.

Other benefits of Chapter 13 bankruptcy include:

  • Your credit will generally start to improve as long as you’re fulfilling your repayment obligations.

  • You may qualify for a new line of credit in as little as one to three years.

  • The bankruptcy only stays on your credit for up to seven years.

  • You are generally entitled to a free financial management course.

  • Once you have completed your repayment plan, creditors cannot require you to repay outstanding debts in full.

A knowledgeable bankruptcy attorney will review your options with you and help you assess whether or not you qualify for a Chapter 13 bankruptcy.

How Albuquerque, New Mexico Legal Counsel Can Help

Filing for Chapter 13 bankruptcy can be a complicated process. Understanding your bankruptcy options, determining your eligibility, completing your bankruptcy forms, and attending court proceedings can make everything even more overwhelming. Luckily,  The Law Office of Jason Cline is here to help. My firm has helped hundreds of clients in Albuquerque and throughout New Mexico get back on the right track financially. Contact my firm today to schedule a simple case assessment.