Filing Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a way to reorganize debt and pay creditors in a manner that is manageable by the debtor. Chapter 13 is different from Chapter 7, which liquidates unsecured debts and no payments are made. Chapter 13 bankruptcy provides the debtor an opportunity to make payments under more favorable conditions, such as lower to no interest rates. It is a restructuring process that allows an individual to make payments on delinquent accounts while keeping their property.
A Chapter 13 bankruptcy will allow an individual to avoid a foreclosure on a property or repossession of a vehicle. The debtor is allowed to request adjustments to payment terms in order to pay off their debt. Repayment terms will usually possess a maximum of 3-5 years. Typically, this is the best option when a file has a sufficient amount of income in order to make payments on delinquent accounts. Some debts in Chapter 7 Bankruptcy that were not discharged may be paid back through Chapter 13. Examples of these non-dischargeable items include back due child support and delinquent income taxes. The amount of debit required to be paid is unique to each individual’s situation. The amount of secured debt to be paid through the repayment plan and the amount of delinquent payments on secured debt affect the amount that will be required to be repaid when filing Chapter 13 bankruptcy.
Types of Debt
There are some unsecured and secured debit limitations that prevent a person for eligibility to file for Chapter 13 bankruptcy. If a person exceeds those limits or has had a previous discharge under Chapter 7 or Chapter 13, they may not be eligible to file for Chapter 13 bankruptcy. It is best to contact an experienced attorney to assist you with determining your eligibility.
When you file for Chapter 13 you will be required to list all of your debt. Often, people find it difficult to provide a listing of their debt and repayment plan or discharge of their debt. Chapter 13 bankruptcy has three ways to manage debt repayment. The first type is secured debt, such as your home or car, which you will pay yourself, separate from bankruptcy. The second is to use the Chapter 13 payment plan to repay your debt for items like car, furniture, mortgage arrears and IRS taxes or delinquent child support. The last type is debt that will be erased when you receive a discharge. Examples of this type include unsecured debits such as credit cards, payday loans, personal loans, medical bills judgments and repossession deficiencies.
The first step to filing Chapter 13 Bankruptcy is to contact one of our qualified attorneys to determine if this is the best solution for you. The attorney will help you create a budge and assist you in working with secured creditors. Together, you and the attorney will develop a Chapter 13 plan and fill out all the necessary forms. The Chapter 13 plan provides details of all the payments and transactions that will occur along with the duration of payments. The Chapter 13 plan must be approved by the court. Payments must begin within thirty to forty-five days after the case has begun. Unlike Chapter 7, where a trustee is appointed to pay the creditor, in Chapter 13 the debtor is responsible for paying the creditor. Once all payments have been made you will receive a discharge and the Chapter 13 plan will be terminated.