Chapter 13 Bankruptcy
A chapter 13 bankruptcy is a bankruptcy payment plan that allows a debtor to retain their property, and pay back all or a portion of their debts over a period of time. Under this chapter, debtors propose a payment plan wherein the debtor makes installment payments to creditors over a period of three to five years. Chapter 13 bankruptcy is also known as the wage earner's plan since it enables individuals with regular income to develop a plan for repaying at least a percentage of their debts.
A Chapter 13 bankruptcy is most appropriate for a debtor with income who does not have currently have the ability to pay all of their debts in full. The debtor will come up with a plan, whereby he/she can repay all or part of their debts over a period of three to five years; in which time creditors may not start or continue their collection efforts. The repayment period depends on the debtor's average income. Generally, payments under the plan are lower than what the debtor would pay without the bankruptcy process.
Contrary to what you may have heard, you do not need to be unemployed to file for bankruptcy. Particularly in the case of a Chapter 13 bankruptcy, a debtor must have income to be eligible. You may have also heard that filing under Chapter 13 requires a debtor to repay all debts in full. This is generally not the case. Although there are certain debts which must be paid in full, unsecured debts are rarely fully paid. Additionally, filing for bankruptcy under any chapter, including Chapter 13, does not permanently ruin your credit, nor does it permanently deny you the ability to obtain credit in the future. Several people are able to obtain credit while in their Chapter 13 plan. Indeed, after the Chapter 13 plan has run its course, many credit card companies who were unsecured creditors in the plan, invite the debtor to apply for credit cards. Most importantly, it is important to bear in mind that filing for bankruptcy, including one under Chapter 13, does not imply a personal failure of the debtor. Most people who file for bankruptcy do so because circumstances which they cannot control have caused their debts to become unmanageable. This does not imply personal failure but merely bad luck. Remember, bankruptcy is a legal process and an individual liberty right under federal law.
As mentioned above, an individual must have income to file for bankruptcy under Chapter 13. Additionally, under current law, unsecured debts of the debtor must be less than $336,900.00; and secured debts less than $1,010,650.00. There are also certain conditions prohibiting a debtor from filing a Chapter 13 bankruptcy if a previous petition had recently been dismissed. If the debtor is eligible to file for bankruptcy under Chapter 13, they must first attend a credit counseling course by an approved agency before filing the bankruptcy petition with the bankruptcy court. Once the petition is filed, an impartial trustee is appointed to administer the case. Concurrent with filing the Petition, a procedure known as an automatic stay goes into effect. This stops collection efforts against the debtor, the debtor's property, and in the case of a Chapter 13 bankruptcy also applies to collection actions against third parties for consumer debts. The court gives notice to all creditors that a bankruptcy has been filed, and twenty to fifty days after filing the trustee will hold a meeting of creditors. At this meeting, the trustee and creditors inquire about the Debtor(s) financial affairs and the debtor(s) proposed plan for repayment. No later than forty-five days after the meeting of creditors, there is a hearing before a Judge to confirm the proposed plan. If the plan is confirmed, the trustee will start distributing funds pursuant to the plan; if not confirmed then the plan is modified, or the debtor(s) may have the option of converting their bankruptcy to one under Chapter 7 of the bankruptcy code.
The benefits of retaining counsel
Having an attorney help you with the bankruptcy process will ensure that you meet the specific eligibility requirements for filing under Chapter 13, that the Petition and relevant documents are correctly completed and timely filed, that your proposed plan is feasible, and most importantly will give you peace of mind. The team of attorneys at Sagaria Law have completed thousands of bankruptcy petitions, and have helped countless individuals and families get out from under their debts. We offer free consultations to determine if bankruptcy is right for you, as well as, the appropriate chapter to file under given your specific circumstances. If you would like to meet with one of our attorneys, contact our office and schedule an appointment.