Filing Chapter 13 Bankruptcy - A Procedural Overview
Chapter 13 bankruptcy law is at times called reorganization bankruptcy. It’s uniquely different than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy most all of your debts are extinguished. But, you must lose any belongings that aren’t exempt from seizure by your creditors. Under Chapter 13 bankruptcy law, you aren’t required to surrender any worldly possessions. But, you’re expected to apply your income to pay back most 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 depends on the size of your debts and income.
Chapter 13 Bankruptcy Law Eligibility
Chapter 13 bankruptcy isn’t for everybody. Chapter 13 bankruptcy law requires applying your income to pay most or all of your debt. So, you’ll have to show to the court that you’re able to fulfill your payment obligations. If your income is irregular or excessively low, the court might not let you to file under Chapter 13 bankruptcy law.
If your total 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 gives a creditor the power to take away a specific piece of property (like your home or car) if you don’t pay off the debt. Your unsecured debts can’t be more than $336,900. An “unsecured debt” doesn’t grant your creditor the right 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 complete 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 reduced rate counseling and, in a few cases, free counseling.
The Chapter 13 Repayment Plan
The most consequential component part of your Chapter 13 bankruptcy paperwork is your repayment plan. It describes in detail how much money you’ll pay to each one of your debts. There’s no official form for the plan. But, virtually all courts render 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 Need to Pay
Your Chapter 13 plan must pay back certain debts fully. These debts are called “priority debts” because they’re considered important enough to spring to the forefront of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax duties. Additionally, your plan must include your usual payments on secured debts.
The plan must establish that any income you have leftover after getting to these mandatory payments will go toward paying back your unsecured debts. You don’t have to pay these unsecured debts fully. You only have to exhibit that you’re giving any remaining income towards their repayment.
How Long Will Your Repayment Plan Last
The length of your repayment plan turns on how much you bring in and how big your debts are. If your typical monthly income during the six months before the date you filed for bankruptcy is bigger than the typical income for your state, you’ll have to offer a five-year plan. If your income is smaller than the typical, you may propose a three-year plan.
Regardless of how much you bring in, your plan discontinues when you pay back all of your debts in full, even if you’ve not reached the three- or five-year mark.
What Goes On If You Can’t Make Plan Payments
If you suffer a job loss after beginning a payment plan or determine that you can’t maintain the payments on your Chapter 13 bankruptcy plan, the bankruptcy trustee may alter your plan. It’s even feasible that the court could grant the discharge of your debts on the ground of hardship. Hardship may include the abrupt loss of a job due to a company closing down or a severe debilitating illness. If the bankruptcy court won’t allow you to modify your plan or permit you a hardship discharge, you may be able to change over to a Chapter 7 bankruptcy.
How Does a Chapter 13 Case End
Once you finish your repayment plan, each remaining 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 responsibilities and that you’ve completed a budget counseling course with an agency approved by the United States Trustee. This budget counseling course is in addition to the required credit counseling you go through before filing for bankruptcy