What is Chapter 13 Bankruptcy?
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.
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. Secured debt is often repaid in full. Unsecured debts are debts 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.
The Chapter 13 Bankruptcy Process
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:
- Details about every debt you owe;
- Documentation of your income for the previous six months;
- Verification that you filed your taxes for the past four years;
- Your driver’s license and social security card;
- A list of all your assets and monthly living expenses; and
- Certification that you completed credit counseling.
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.
Work with an Experienced Merrillville Bankruptcy Lawyer
To ensure that your rights are protected throughout the Chapter 13 bankruptcy process, work with an experienced bankruptcy lawyer. Contact Schmidt Whitten & Whitten today to set up your initial consultation in our office.
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At Schmidt Whitten & Whitten, we offer a free consultation during which we will examine the facts of your case and advise you on how best to proceed