Filing Chapter 13 Bankruptcy – A Procedural Overview
Chapter 13 bankruptcy law is occasionally 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 don’t have to relinquish any material items. But, you’re required to utilize your income to pay back most or all of what you owe your creditors. Your payments to creditors are made over time, typically from three to five years. The time parameter hinges on the size of your debts and income.
Eligibility for Chapter 13 Bankruptcy
Chapter 13 bankruptcy isn’t for everyone. Chapter 13 bankruptcy law requires applying your income to pay most or all of your debt. So, you’ll have to certify to the court that you’re capable of fulfilling your payment responsibilities. If your income is unpredictable or too low, the court might not let you to file under Chapter 13 bankruptcy law.
If your complete debt burden is excessively high, you’re likewise ineligible 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 right to take a specified piece of property (like your home or car) if you don’t pay the debt. Your unsecured debts can’t be greater than $336,900. An “unsecured debt” doesn’t grant your creditor the power to take your property. 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.
Opening 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 furnish cut rate counseling and, in a few situations, free counseling.
The Chapter 13 Repayment Plan
The most consequential component part of your Chapter 13 bankruptcy paperwork is your repayment plan. It traces in detail how much money you’ll commit to each one of your debts. There’s no standard form for the plan. But, almost 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 Be Required to Pay
Your Chapter 13 plan must pay back certain debts in full. These debts are called “priority debts” because they’re viewed important 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 include your usual payments on secured debts.
The plan must indicate that any income you have left over after getting to these essential payments will go to paying back your unsecured debts. You don’t have to pay off these unsecured debts in full. You merely have to demonstrate that you’re applying any left over income towards their repayment.
How Long Is Your Repayment Plan
The length of your repayment plan hinges upon how much you make and how big your debts are. If your average monthly income during the six months before the date you filed for bankruptcy is larger than the standard income for your state, you’ll need to offer up a five-year plan. If your income is smaller than the median, you may suggest a three-year plan.
Regardless of how much you earn, your plan ends when you pay back each of your debts fully, even if you’ve not progressed to the three- or five-year mark.
What Takes Place If You Can’t Produce Plan Payments
If you encounter a job loss after initiating a payment plan or determine that you can’t sustain the payments on your Chapter 13 bankruptcy plan, the bankruptcy trustee may change your plan. It’s even possible that the court could allow 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 serious debilitating sickness. If the bankruptcy court won’t allow you to change your plan or allow you a hardship discharge, you may be able to convert to a Chapter 7 bankruptcy.
When Is a Chapter 13 Case Over
Once you complete your repayment plan, every leftover debt that’s eligible for a discharge will be canceled out. But, before you’ll be able to obtain a discharge, you must prove to the court that you’re current on your child support duties and that you’ve finished a budget counseling course with an agency accredited by the United States Trustee. This budget counseling course is in addition to the required credit counseling you fulfill prior to filing for bankruptcy
