Information About a Chapter 13 Bankruptcy
Chapter 13 Bankruptcy Information: What is a Chapter 13?
A Chapter 13 bankruptcy is also known as reorganization or wage earners bankruptcy. Since bankruptcy law is designed to cater for a wide range of individuals, a Chapter 13 bankruptcy caters for those bankruptcy filers who earn too much to qualify for a Chapter 7 bankruptcy. The Chapter 13 bankruptcy filing process includes proposing a payment plan to the Court indicating how you will repay your debt to creditors with your disposable income, which is any left over funds after your basic expenses have been paid. Your attorney usually consolidates your income and expense information. These figures are then used to determine what your monthly payment will be to the Court. Once the Court approves your payment plan, it will last anywhere between three to five years. Any balances on debt included in your Chapter 13 bankruptcy will be discharged after this period, provided that you did not default on any of the payments to the Court.
Chapter 13 Bankruptcy Eligibility
In order to file for a Chapter 13 bankruptcy, your secured debt total cannot be more than $1,149,525. Your unsecured debt cannot exceed $383,175. Your attorney will assist you in differentiating between secured debts and unsecured debts.
To qualify for a Chapter 13 bankruptcy, you have to be able to prove to the Court that you will have adequate funds left over to contribute towards the Chapter 13 payment plan.
Another requirement to qualify for a Chapter 13 bankruptcy is that your taxes must be current. You have to include either paperwork of your actual tax returns or transcripts obtained from the IRS. Failure to provide proof of tax filings may result in a negative outcome of your bankruptcy case.
If you have received a discharge on a Chapter 7 bankruptcy in the past four years or a Chapter 13 bankruptcy in the past two years, you may not be eligible for a Chapter 13 bankruptcy discharge. However, this does not mean that you are prohibited from filing a Chapter 13 bankruptcy. For example, you may file for a Chapter 13 bankruptcy as soon as you receive a Chapter 7 bankruptcy filing to merely handle any liens that were not discharged on your Chapter 7 bankruptcy, but you will not be granted a discharge. In this case, a Chapter 13 bankruptcy filing will help you handle your other debt by way of the automatic stay. Your attorney can provide you on more information about filing a Chapter 13 bankruptcy immediately after receiving a Chapter 7 bankruptcy discharge.
These are just a few basic requirements that have to be fulfilled to be eligible to file for a Chapter 13 bankruptcy. Your attorney can advise you further with regards to additional requirements for a Chapter 13 bankruptcy.
How Can a Chapter 13 Bankruptcy Help Me?
One of the most attractive characteristics of a Chapter 13 bankruptcy is that it will give you the chance to keep non-exempt and exempt property. If facing foreclosure on your home due to missed mortgage payments, a Chapter 13 bankruptcy filing may help you save your home. Similarly, if your vehicle is being repossessed, a Chapter 13 bankruptcy will give you a chance to catch up on outstanding loan payments on your vehicle and prevent repossession.
Similar to a Chapter 7 bankruptcy, once you file for a Chapter 13 bankruptcy, you are under protection of the Automatic Stay. The Automatic Stay clause strictly prohibits creditors from pursuing any debt collection activities after you have filed bankruptcy. If a creditor does contact you seeking payment on outstanding debt after you have filed bankruptcy, he or she will be in violation of the Automatic Stay and can be sued.
A Chapter 13 bankruptcy is almost like consolidation of your debt and makes it easier to keep track of what you owe. Instead of managing multiple payments to several creditors, you pay the Trustee one amount that will be distributed among all of your creditors.
Some debt such as student loans and taxes, which may not be discharged in a Chapter 7 bankruptcy, can be included in a Chapter 13 bankruptcy payment plan, and be paid over time.
If you have a co-debtor on any of your debt, a Chapter 13 bankruptcy will prohibit creditors from going after your co-debtor. It is important to note that in order for your co-debtor to be protected when you file for Chapter 13 bankruptcy, you have to make on-time and full payments on your Chapter 13 payment plan.