Filing Chapter 13 Bankruptcy - A Procedural Overview
Chapter 13 bankruptcy law is on occasion referred to as reorganization bankruptcy. It’s uniquely different than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy virtually all of your debts are eliminated. But, you must lose any belongings that aren’t exempt from seizure by your creditors. Under Chapter 13 bankruptcy law, you don’t have to abandon any worldly items. But, you’re required to utilize your income to pay back some or all of what you owe your creditors. Your payments to creditors are made over time, generally from three to five years. The time frame hinges on the size of your debts and income.
Chapter 13 Bankruptcy Eligibility Requirements
Chapter 13 bankruptcy isn’t for everyone. Chapter 13 bankruptcy law calls for utilizing your income to pay off most or all of your debt. So, you’ll have to demonstrate to the court that you’re capable of fulfilling your payment obligations. If your income is sporadic or too low, the court might not allow you to file under Chapter 13 bankruptcy law.
If your complete debt load is excessively high, you’re likewise unqualified to file under Chapter 13 bankruptcy law. Your secured debts can’t be more than $1,010,650. A “secured debt” is one that grants a creditor the ability to take a particular piece of property (like your house or automobile) if you don’t pay off the debt. Your unsecured debts can’t be more than $336,900. An “unsecured debt” doesn’t give your creditor the power to take your belongings. An example of an “unsecured debt” is a credit card or a medical bill.
The eligibility requirements of a Chapter 13 bankruptcy are covered in detail in Chapter 13 Bankruptcy: Keep Your Property & Repay Your Debts Over Time.
Commencing a Chapter 13 Bankruptcy
Before filing a Chapter 13 bankruptcy, you must attend credit counseling from an agency approved by the United States Trustee’s office. These agencies are allowed to charge a fee for their services. But, if you can’t afford to pay the fee, they have to supply cut rate counseling and, in a few situations, free counseling.
The Chapter 13 Repayment Plan
The most pivotal part of your Chapter 13 bankruptcy paperwork is your repayment plan. It traces in detail how much money you’ll devote to every one of your debts. There’s no standard form for the plan. But, most all courts supply their own forms. To learn more about Chapter 13 Bankruptcy repayment plans, read Chapter 13 Bankruptcy: Keep Your Property & Repay Your Debts Over Time.
How Much Will You Be Required to Pay
Your Chapter 13 plan must pay off particular debts fully. These debts are called “priority debts” because they’re regarded important enough to jump to the forefront of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax duties. In addition, your plan must include your regular payments on secured debts.
The plan must show that any income you have remaining after getting to these essential payments will go to paying your unsecured debts. You don’t have to pay these unsecured debts fully. You merely have to establish that you’re applying any unconsumed income towards their repayment.
How Long Is Your Repayment Plan
The length of your repayment plan turns on how much you earn and how much you owe. If your standard monthly income during the six months before the date you filed for bankruptcy is greater than the normal income for your state, you’ll want to tender a five-year plan. If your income is smaller than the normal, you may offer a three-year plan.
Regardless of how much you bring in, your plan stops when you repay all of your debts in full, even if you’ve not reached the three- or five-year mark.
What Happens If You Can’t Make Plan Payments
If you suffer a job loss after commencing a payment plan or ascertain that you can’t keep up the payments on your Chapter 13 bankruptcy plan, the bankruptcy trustee may alter your plan. It’s even feasible that the court could allow for the discharge of your debts on the basis of hardship. Hardship may include the abrupt loss of a job due to a company shutdown or a severe debilitating sickness. If the bankruptcy court won’t permit you to change your plan or give you a hardship discharge, you may be able to convert to a Chapter 7 bankruptcy.
How Does a Chapter 13 Case Conclude
Once you finish your repayment plan, each continuing debt that’s eligible for a discharge is wiped out. But, before you’ll be able to acquire a discharge, you must demonstrate to the court that you’re current on your child support obligations and that you’ve completed a budget counseling course with an agency authorized by the United States Trustee. This budget counseling course is in addition to the mandatory credit counseling you go through before filing for bankruptcy
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