Chapter 13 Bankruptcy Attorneys
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a court-approved repayment plan where individuals repay all or a portion of their debts. The plan spans a period of three to five years and is based primarily on the disposable monthly income of the individual. Individuals who do not qualify for Chapter 7 bankruptcy based on their high incomes are “steered” into this chapter, but they can also utilize the benefits of Chapter 13 as a way to protect or keep assets that would otherwise be liquidated.
Who Can Benefit?
Whereas Chapter 7 bankruptcy provides a method for immediate and complete relief from debts, Chapter 13 bankruptcy is for individuals with enough income to sustain monthly payments under a court-approved repayment plan. The total repayment may partially or fully compensate an individual’s creditors, depending on the circumstances of the particular case. If an approved plan only partially satisfies the individual’s creditors, then the individual is eligible for a discharge of the unpaid balance, provided the other terms of the plan are fulfilled.
Once the bankruptcy case is filed, the debtor will propose a repayment plan, which is subject to the approval of the Trustee, the creditors and the court. The first bankruptcy payment is due 30 days after the initial filing of the case. Just like in Chapter 7 bankruptcy, all debtors are required to attend a meeting of creditors, as well as an in-person class in personal financial management, which can be taken place during the afternoon after the meeting of creditors. As with other chapters, individuals are generally protected from their creditors, who typically need approval from the Bankruptcy Court before continuing or pursuing various actions against the individual.
Individuals cannot be forced into Chapter 13 bankruptcy, and they are typically eligible so long as their household has some form of regular income and their debts do not exceed the limits imposed by the Bankruptcy Code. Chapter 13 cases are routinely converted to Chapter 7 or 11 (assuming they meet eligibility requirements) and can usually be dismissed at any time, which makes it an effective bankruptcy tool to stop foreclosure actions (at least temporarily), garnishments for student loans or taxes, evictions and repossessions.
The Basics of Chapter 13 Bankruptcy:
Regular Income: The Chapter 13 repayment plan must be funded by some sort of regularly recurring income, which should be steady and sufficient enough to demonstrate an ability to afford the proposed monthly payment. If your income is irregular or too low, the court might find that your proposed plan is infeasible, which could result in the conversion or dismissal of your case.
Debt Limits: If your total debt burden is too high, you may be ineligible. Your secured debts cannot exceed $1,149,525 and your unsecured debts cannot be more than $383,175. A "secured debt" is one that gives a creditor the right to take a specific item of property (such as car loan or mortgage) if you don't pay the debt. An "unsecured debt" (such as a credit card or medical bill) doesn't give the creditor this right.
Credit Counseling & Filing Fee: Before you can file a Chapter 7 or Chapter 13 bankruptcy, you must receive 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 they must provide counseling for free or at reduced rates for individuals who demonstrate an inability to pay. In addition, you'll have to pay the filing fee, which is currently $281.
Which Debts are Paid: The Chapter 13 repayment plan must pay certain debts in full. These debts are called "priority debts" and include debts such as child support, alimony and certain tax obligations. In addition, your plan must include your regular payments on secured debts, such as a car loan or mortgage, as well as repayment of any arrearages on the debts (the amount by which you've fallen behind in your payments). Lastly, the plan must show that any disposable income you have left after making these required payments will go towards repaying your unsecured debts, such as credit card or medical bills. You don't have to repay these debts in full (or at all, in some cases), but you must demonstrate that you are putting any remaining income towards their repayment.
Length of Repayment: The length of your repayment plan depends largely on how much income you earn and how much debt you owe. If your average monthly income over the six months prior to the date you filed for bankruptcy is more than the median income for your state, you're required to propose a five-year plan. If your income is lower than the median, you may propose a three-year plan. (To get the median income figures for your state, go to the United States Trustee's website, www.usdoj.gov/ust, and click "Means Testing Information.")
Modification and/or Dismissal: If for some reason you cannot complete your Chapter 13 bankruptcy plan -- for example, you lose your job six months into the plan and can't keep up the payments -- the bankruptcy trustee may modify your plan, or the court might let you discharge your debts on the basis of hardship. Examples of hardship would be a sudden and prolonged loss of income or a debilitating illness. If the bankruptcy court won't let you modify your plan or give you a hardship discharge, you might be able to convert to a Chapter 7 bankruptcy or ask the bankruptcy court to dismiss your Chapter 13 bankruptcy case (you would still owe your debts, plus any interest creditors did not charge while your Chapter 13 case was pending).
Discharge: Once you have successfully completed your repayment plan, all debts that were not repaid in the plan and that are eligible for discharge will be eliminated. Before you can receive a discharge, you must show the court that you are current on your child support and/or alimony obligations and that you have completed a budget counseling course with an agency approved by the United States Trustee.
Why File Chapter 13 Bankruptcy?
There are several benefits to this form of bankruptcy:
• You can delay or halt foreclosure, garnishment or eviction proceedings.
• You can secure a payment plan that fits your budget.
• You can protect the co-signers at risk because of your debt.
• You can keep most of your assets, even those that are non-exempt.
• You have no direct contact with creditors, as the Trustee handles your payments.
Call 214-609-8787 right now to schedule your Free Consultation. It's the first step toward the new beginning you deserver.
Call 214-609-8787 right now to schedule your Free Consultation. It's the first step toward the new beginning you deserve.
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