Chapter 13 bankruptcy law is at times referred to as reorganization bankruptcy. It’s very different than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy almost all of your debts are eliminated. But, you must forfeit any belongings that aren’t exempt from seizure by your creditors. Under Chapter 13 bankruptcy law, you don’t have to forfeit any worldly possessions. But, you’re expected to apply your income to pay some or all of what you owe your creditors. Your payments to creditors are made over time, usually from three to five years. The time frame turns 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 applying your income to pay some or all of your debt. So, you’ll have to exhibit 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 entire debt load is overly high, you’re also 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 gives a creditor the right to take away a specified piece of property (like your house or car) if you don’t pay the debt. Your unsecured debts can’t be more than $336,900. An “unsecured debt” doesn’t give your creditor the ability to take your properties. 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.
Initiating a Chapter 13 Bankruptcy
Prior to filing a Chapter 13 bankruptcy, you must go through credit counseling from an agency approved by the United States Trustee’s office. These agencies are permitted to charge a fee for their services. But, if you can’t afford to pay the fee, they have to offer cut rate counseling and, in a few situations, free counseling.
The Chapter 13 Repayment Plan
The most fundamental part of your Chapter 13 bankruptcy paperwork is your repayment plan. It describes in detail how much money you’ll dedicate to every one of your debts. There’s no authorized form for the plan. But, nearly all courts provide 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 Have to Pay
Your Chapter 13 plan must pay off particular debts in full. These debts are called “priority debts” because they’re thought significant enough to rise to the forefront of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax obligations. In addition, your plan must address your scheduled payments on secured debts.
The plan must indicate that any income you have remaining after doing these compulsory payments will go toward paying back your unsecured debts. You don’t have to repay these unsecured debts fully. You only have to establish that you’re applying any unconsumed income towards their repayment.
How Long Will You Make Repayment
The duration of your repayment plan depends on how much you bring in and how big your debts are. If your standard monthly income during the six months prior to the date you filed for bankruptcy is greater than the typical income for your state, you’ll want to offer a five-year plan. If your income is smaller than the average, you may offer a three-year plan.
Regardless of how much you earn, your plan ends when you repay all of your debts fully, even if you’ve not arrived at the three- or five-year mark.
What Goes On If You Can’t Produce Plan Payments
If you encounter a job loss after taking up a payment plan or ascertain that you can’t keep up the payments on your Chapter 13 bankruptcy plan, the bankruptcy trustee may modify your plan. It’s even feasible that the court could allow for the discharge of your debts on the ground of hardship. Hardship may include the abrupt loss of a job due to a company shutting down or a severe debilitating sickness. If the bankruptcy court won’t permit you to modify your plan or permit you a hardship discharge, you may be able to change over to a Chapter 7 bankruptcy.
When Is a Chapter 13 Case Over
After you finish your repayment plan, each continuing debt that’s eligible for a discharge is wiped out. But, before you’ll be able to obtain a discharge, you must demonstrate to the court that you’re up-to-date on your child support obligations and that you’ve finished 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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