Individuals who do not qualify for Chapter 7 bankruptcy may file Chapter 13 instead. Chapter 13 is also an option for businesses, but it is far more common for them to file Chapter 11 bankruptcy. Unlike Chapter 7 bankruptcy, Chapter 13 does not involve the liquidation of the filer’s nonexempt assets. Rather, it involves the creation of a debt repayment plan that allows the filer to work through the debt over the course of three to five years with careful budgeting and supervision by a bankruptcy trustee. Some individuals who qualify for Chapter 7 opt to file for Chapter 13 instead because of the greater control the filer has in this process.
We often get asked, What reasons should I file a Chapter 13? People often think Chapter 13 is a reorganization and payback of all your debts. And that’s not true. Chapter 13 is a reorganization, but you oftentimes do not pay back all of your debts. Chapter 13 lasts for three to five years, people primarily filed chapter 13 to stop Sheriff sales. If your house is being said, for sure, so there’s no way to stop it. File a Chapter 13 that gives you up to five years to catch up on your mortgage payments, become current with the mortgage, and keep your house. Often, people file chairpersons to stop repossessions. If you’re a couple of months behind in your car, they’re going to come take it, file a check with their team, and you can pay off your car over the next five years. If the IRS is garnishing your wages, you can file a Chapter 13, which will stop the garnishment and give you an opportunity to pay back the taxes that you owe over five years. Oftentimes, the interest will stop, and penalties good discharged. Then there’s the determination of how much of those unsecured debts get paid. Unsecured debts include things like credit cards, medical bills, payday loans, all those things are lumped together as an unsecured creditor. And the amount of those that get paid back is determined by how much income you have and how much equity in the assets that you own. So the more income you have, the more assets you have, obviously, the more of those unsecured debts you’re going to pay back. If you have minimal income and minimal value in your assets. Oftentimes, those unsecured creditors don’t get paid anything. So, if you want to discuss your financial situation, feel free. Give us a call.
It is important to note that most Chapter 13 filers do not repay all of their unsecured debt. Generally, a portion of this is repaid, while secured debt is often repaid in full. Unsecured debts are those that are not backed by collateral, such as debts on unsecured credit cards. Secured debts are those that are backed by collateral, like your mortgage.
Like with Chapter 7, you will need to complete a credit counseling course before you can file for Chapter 13 bankruptcy. More than 180 days may not elapse between completing your course and filing your bankruptcy petition. Your debt must also not exceed the following amounts: $1,184,200 for secured debts and $394,725 for unsecured debts.
To file for Chapter 13 bankruptcy, you will need to provide the following:
We understand that bankruptcy can have a negative connotation, but there are also some positives that come with bankruptcy. Bankruptcy does not have to ruin you financially.
In order to move forward with your Chapter 13 bankruptcy plan, you will need to submit a repayment plan and have it approved. Approval of your plan is based on your ability to realistically make your proposed monthly payments based on your income. Your bankruptcy trustee may recommend your play for confirmation by the court, and once it is confirmed, you must adhere to it for the specified period of time. You will make the payments to your trustee, who will disburse the money to your creditors. Once you file for bankruptcy, an automatic stay goes into effect. This is a court order prohibiting your creditors from attempting to collect debt payments from you. Certain collections are not affected by this, though. These include child and spousal support payments.
When you have satisfied the repayment plan, the court may close your case. A closed Chapter 13 bankruptcy will remain on your credit report for seven years following its completion.
When most people first learn of Chapter 13 bankruptcy, they have a lot of questions about what the process is like, what to expect, and whether it is right for them. Here are 13 facts you need to know about Chapter 13 to help you be debt-free and determine if Chapter 13 bankruptcy is for you.
To ensure that your rights are protected throughout the Chapter 13 bankruptcy process, work with an experienced bankruptcy lawyer. Contact Whitten & Whitten today to set up your initial consultation in our office.
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