Chapter 13 is a reorganization of your financial affairs. It’s the common man’s Chapter 11–far cheaper and far easier (in most cases.) Chapter 13 is only available to individuals, so if you want to reorganize your corporation you will have to look to Chapter 11 (or just liquidate using Chapter 7).
Chapter 13 has strict limitations on the amount of debt you can reorganize. Currently you can’t have more than $360,475 in unsecured debts and $1,081,400 in secured debts. (A secured debt is a mortgage or a car loan). Many people can’t get Chapter 13 relief because they’ve had a foreclosure or own investment property. For example, if you bought a house for $600,000 back in the boom years and took out a $600,000 loan, you’d be out of luck if the house was worth $230,000 when your lender foreclosed. The unsecured portion of the loan is now $370,000, which is over the unsecured limit.
Most people want to file Chapter 7, until they learn they may lose important non-exempt assets. The advantage of Chapter 13 is that you get a discharge without losing non-exempt assets. In exchange for keeping assets, such as a classic sports car, you have to pay your creditors a portion of your income over the next 3 to five years.
