Is Chapter 13 Bankruptcy Right for You?

Filing for bankruptcy can be a godsend for those drowning in debt. For those individuals who make a steady income but are still overwhelmed by debt, Chapter 13 bankruptcy may provide financial relief.

Chapter 13 bankruptcy, also known as a wage earners plan, reorganizes a filer's debts in a way that makes payments manageable. A Chapter 13 repayment plan lasts three to five years, at the end of which the remaining balance on eligible debts are eliminated if a filer made payments in full and on time. This type of bankruptcy can provide several benefits to eligible individuals.

The Benefits of Chapter 13 Bankruptcy

One of the biggest benefits of Chapter 13 bankruptcy is that it often allows filers to avoid foreclosure of their family homes or repossession of their vehicles. Chapter 13 bankruptcy places an automatic stay on the collection of a filer's debts, including the foreclosure process. During bankruptcy proceedings, filers are able to negotiate mortgage payments into their repayment plan.

Repayment plans under Chapter 13 bankruptcy make payments easy and uncomplicated for filers. Debts are consolidated and the filer sends one payment to their Chapter 13 trustee, who then distributes payments to the filer's creditors. This helps keep things streamlined and stress-free for filers.

Chapter 13 Eligibility Requirements

To be eligible for Chapter 13 bankruptcy, filers must have a steady income and be under maximum secured and unsecured debt requirements. Secured debt is debt backed by collateral, like a mortgage or car loan, while unsecured debt is backed by a filer's promise to pay, like credit card debt and other consumer loans. Filers must have less than $1,081,400 in secured debts and $360,475 in unsecured debt to qualify for Chapter 13 bankruptcy.

Additionally, all Chapter 13 filers must have completed credit counseling within 180 days of filing.

How Chapter 13 Bankruptcy Works

The Chapter 13 bankruptcy process begins when a filer submits a petition to his or her local bankruptcy court. In addition to the petition, filers must include schedules of their assets, liabilities, income and expenditures; contracts and unexpired leases; a statement of financial affairs; proof of credit counseling participation; tax return and a list of creditors. There is a mandatory $235 filing fee and an administrative fee of $45.

Once a petition is filed, an automatic stay is applied to all of the filer's debts, which prohibits creditors from pursuing collection from the filer until bankruptcy proceedings are complete. A bankruptcy trustee is assigned to the case whose job is to evaluate the petition, mediate negotiations between the court, the filer and creditors and distribute payments to creditors once a repayment plan is underway.

One to two months after filing, filers meet with their trustee and creditors to review the proposed repayment plan and resolve issues. The filer will elaborate on his or her financial situation and the plan will be approved at this time.

Once a plan is in place, the filer will make payments to the trustee, who will distribute payments to creditors. After a few years of successful payments, the rest of the filer's eligible debts are discharged and the bankruptcy process is complete.

Chapter 13 can be a solution for income-earning individuals with burdensome debts. To find out if you are eligible for Chapter 13 bankruptcy, contact an experienced bankruptcy attorney.

Article provided by Luther J. Mills Law Office
Visit us at http://www.luthermillslawoffice.com/

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