Finding yourself on sticky financial wicket can be traumatic for many people. Often accumulated debts make a person unsure of what to do next. As per Dallas bankruptcy lawyers’ Recovery Law Group bankruptcy is one of the best options available. However, filing for bankruptcy requires you to choose from a number of Chapters, each specifically designed to help people get over financial problems. In case, you are unsure which chapter suits your case, Chapter 13 might be your best chance for starting afresh. Chapter 13 bankruptcy works best for people with reasonably sufficient disposable income which can be used to make reasonable monthly payments with respect to their debts.
Why opt for Chapter 13 bankruptcy?
Unlike Chapter 7 bankruptcy, where unsecured debts are liquidated, in Chapter 13, the debtor can restructure the accumulated debt into manageable payments over a longer period of time (3-5 years’). However, not everyone can opt for this Reorganisation Bankruptcy. To qualify for this chapter you should have a regular income and the wages must be adequate enough for the repayment plan. The various benefits of filing for Chapter 13 bankruptcy include:
- You can repay debts in 3-5 years;
- Can put an end to annoying creditor actions;
- You might be able to get rid of 2nd or 3rd mortgage;
- You might be able to save your home from foreclosure;
- Get a fresh financial start after you complete the repayment plan.
In case you are unsure whether Chapter 13 is the best chance for you to get out of financial problems, contact expert bankruptcy attorneys at 888-297-6023 to find out more.
Using Chapter 13 Bankruptcy to stop foreclosure
Since debts are reorganized in Chapter 13, it makes it easier for people to avoid repossession or/and foreclosure. If you have fallen behind on making payments, and are risking foreclosure, Chapter 13 is an excellent way to take control of the situation. Filing for bankruptcy puts an automatic stay in place due to which any foreclosure and debt collection is put on hold. However, it is essential that you follow the Chapter 13 bankruptcy timeline to avail the entire benefits:
- Take a mandatory credit counseling course within 180 days of filing
Every Chapter 13 bankruptcy case requires completion of an approved credit counseling course prior to filing. The course should be done from a U.S. Trustee’s Office approved agency. The course is beneficial in making you aware of your situation as well as ensure that you have sufficient income to pay back creditors over the stipulated timeframe. The fee of the course is $25-$35, but in case you cannot afford it, it can be waived off.
- Automatic stay benefit
Once you submit forms for your Chapter 13 bankruptcy and the filing fee is paid, a court order for automatic stay is issued by the court. This puts a stop, over all kind of collection efforts like repossession, foreclosure, etc. being made by debt collectors. However, if you have previously filed for bankruptcy within the last year, you might not get automatic stay security or it might be limited.
- Submit a repayment plan for court approval
You and your bankruptcy attorney can come up with a reasonable repayment plan as per your income. This is done by carefully assessing your finances as well as taking the credit counseling course. Once the repayment plan is devised, it is sent to the bankruptcy court for approval.
- Creditor meeting within 20-40 days of filing
The creditor meeting is a hearing which is attended by your bankruptcy trustee, attorney, and any creditors wishing to attend the same. The purpose of the meeting is to discuss your Chapter 13 bankruptcy. Many times, creditors do not appear for the meeting. The information is reviewed and questions answered by your attorney.
- Confirmation hearing 20-40 days after creditor meeting
The proposed repayment plan is reviewed by the bankruptcy court and confirmed if it meets all requirements like –
- Being feasible (enough income to pay creditors as per proposal)
- Made in good faith and not to manipulate the bankruptcy process
- Conforming to bankruptcy laws (precedence to creditors and priority debts)
6. Secondary counseling after the creditors meeting
During the bankruptcy process, debtors filing for Chapter 13 bankruptcy are required to finish another credit counseling course. This course helps you develop a habit of living on a budget and getting you ready for life after bankruptcy.
- Repay debt every month for 3-5 years
Repayment plans are effective immediately and you are required to make monthly payments as per it over a course of three to five years. In case, there is any change in your finances due to which you need to modify your repayment plan or change the chapter of bankruptcy (from Chapter 13 to Chapter 7), you can consult with an expert bankruptcy attorney.
- Get remaining debts discharged after your bankruptcy ends
During your repayment plan, most of your debts are paid off. However, any debt that remains after the repayment plan is over, is generally discharged. It is important to remember that some debts like taxes, child support, etc. cannot be discharged, though most unsecured debts are eliminated after Chapter 13 bankruptcy.
Eligibility for Chapter 13 Bankruptcy
Whereas Chapter 7 bankruptcy requires you to pass a “means test”, Chapter 3 does not have such a requirement. This does not mean that there aren’t any eligibility criteria. It is important to show the bankruptcy court that you earn sufficient income that you can make your repayment obligations after making necessary payments for secured debts like car or mortgage payments. The court allows you to use income obtained through:
- Profits from self-employment
- Income from your job
- Any benefits (disability, social security, workers’ compensation, unemployment, )
- Spousal or child support
- Earning from property sales
You are also required to meet debt limit requirements as part for Chapter 13 bankruptcy eligibility. The secured and unsecured debts, which keep changing every year, cannot exceed a definite amount. Non-payment of secured debts which are linked to property like house or car can lead to creditors taking the property back. Unsecured debts (credit card and medical bills), on the other hand, are not attached to any property. In case your debt amounts cross the specific limit set by law, you might have to consider another type of bankruptcy (possibly Chapter 11).
Chapter 13 bankruptcy is available for individuals and not businesses. An individual with a business debt in his/her name can include the said debt in Chapter 13 bankruptcy as business-related debts can also be reorganized in this bankruptcy chapter. In case you are an individual who has been going through a bad financial phase and are looking for a way to get a fresh start, consult expert bankruptcy lawyers to seek a way out through this phase.