Struggling with debts and you are convinced that you can’t possibly discharge your debts within the time allotted by your credit companies and then someone advises you to file for bankruptcy. You might be confused about the option open to you.
It is either you file for Chapter 7 bankruptcy or chapter 13 bankruptcy. In this post, we will be talking about chapter 13 bankruptcy and everything you should know about it. Also, get here to hire the best recommended bankruptcy attorney.
What to expect in this post;
- What is Chapter 13 bankruptcy?
- The eligibility for Chapter 13
- Process of filing for Chapter 13
What Is Chapter 13 Bankruptcy?
Chapter 13 is the process whereby a debtor approaches the court for a reorganization of their finances. It is mostly undertaken by debtors who have valuable property to protect and don’t want the relief offered by Chapter 7 bankruptcy.
Most people who file for chapter 13 bankruptcy are those who have the means of payment of their debts but are not comfortable with the timeline offered by the credit card companies.
The debtors are out under the supervision of a court-appointed trustee who ensures that the payment is ensured every month and the debtors comply with all agreed upon. Chapter 13 bankruptcy usually takes up to three to five years depending on the income of the debtor. Hence, why it is sometimes called the Wage Earner’s bankruptcy.
The Eligibility for Chapter 13
Chapter 13 is not open for everyone to pursues and as such as certain criteria that must be ensured before an individual file for the same.
- Debt Limits
There is a limit to the debt that can have the chance to Chapter 13. Secured debts allow the creditors to take your property such as your car or house while unsecured debts like medical bills and credit cards don’t allow the same.
Both secured debts and unsecured debts can not exceed are $1,184,200 and $394,725 respectively. This changes every three years. Any debts that exceed this limit have the alternative of filing for Chapter 11.
- Steady Income
When filing for chapter 13, you must be able to convince the court that you can satisfactorily meet your household obligations while still paying into a repayment plan put in place.
If your income is irregular or too low, the court will not approve of your proposed repayment plan.
- Not a Business
Chapter 13 is not open for a business but mainly an individual. This means that companies can not file for this but business-related debts that you are personally responsible for will be included in your plan. Sole proprietorship might be able to benefit from the chapter though.
Process Of Filing For Chapter 13
Chapter 13 case begins with a petition which is filed by the debtor in a bankruptcy court that serves the area where the debtor is domiciled or reside in. Along with the petition are documents that must accompany it such as schedules of assets and liabilities, a schedule of current income and expenditures, a schedule of executory contracts and unexpired leases, and a statement of financial affairs.
All court filing fees must be paid and you must provide the court with a certificate that demonstrated you have acquired the mandatory credit counseling education from an approved agency by the United States Trustees Office. And this also comes with a fee between $25 – $40. This course helps you to evaluate whether or not you’re eligible to file for Chapter 13 according to your income. And also you will undergo a second course after filing your case tagged “debtors education”.
Also, the debtor must prepare a Chapter 13 repayment plan detailing how you proposed to offset your debts which will also be filed in the court and provided to your creditors. The plan must include all accounts of your debts. Though your creditors can object to your proposed plan, you both can come to terms with each other after several modifications.
If there are no objections, the court will confirm the plan if it satisfied the following criteria;
- That the plan is feasible and as such the debtor’s income will be well enough to pay the creditors as provided.
- That the debtor proposed the plan in good faith and not in the guise of manipulating the bankruptcy process
- That the plan complies with bankruptcy law and regulations.
The debtors must successfully exhaust the repayment plan within three to four years or as agreed upon before his slate of debts can be wiped clean.
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