Chapter 13 bankruptcy enables consumer debtors with regular income to
develop a repayment plan. In filing chapter 13, they can keep all of
their properties. But depending on the size of their debts and the
amount of their income, they have to reorganize a payment plan and use
their income to pay some or all of their debts, usually over 3 to 5
years.
If debtors don't qualify to file Chapter 7 bankruptcy, Chapter 13
bankruptcy might be a good option for them. However, the new bankruptcy
law does not give all bankrupt debtors the opportunity to reorganize
their assets; they may still have to prove that they can pay theirs
debts as arranged with their income.
Bankruptcy Chapter 13 Requirements
As Chapter 13 requires a filer -- an individual, husband or wife, or a
sole proprietor -- to use their income to repay some or all of their
debts, they must not have an irregular or a low income. While the
Chapter7 bankruptcy filers have to prove that they can no longer pay any
of their debts, Chapter13 bankruptcy filers have to prove that they can
pay their debts.
The amount of debts must not also be way too excessive. According to
uscourts.gov, the amount of the secured debts should not exceed
$922,975, and the amounts of the unsecured debts are less than $307,675.
These amounts are adjusted periodically to reflect changes in the
consumer price index.
Prospective bankruptcy filers would also need to present a certificate
of a credit counseling course completion form an approved credit
counseling agency, within 180 days before filing. And if they enroll in
debt management plans as required by the credit counseling, the programs
must be filed with the court.
For filing Chapter 13 filers are required to file numerous documents that
include federal tax returns for the most recent tax year and prior years
when the case began, assets and liabilities, earnings and spending, as
well as to submit a debt repayment plan along with the $274 filing-fee.
Chapter 13 Bankruptcy Process
Upon filing, once the bankruptcy court
verifies and approves that the filer has a regular job with regular
income; it will prompt the debtor to immediately start making payments
within 30-days of filing. An appointed case trustee may automatically
deduct some monthly payments from the wages and then instantly
distributes to the creditors.
In the Chapter13 Bankruptcy, the trustee pays creditors in order of the
claim they hold -- priority, secured and unsecured. The trustee will
ensure that all debts, after priority debt, are paid in order according
to bankruptcy code rules. And if the debtor manages to complete all the
payment plans, he or she is given a full plan discharge.
In short, the new bankruptcy law has strict rules as to who can qualify
for Chapter 13 bankruptcy. If you are a regular wage earner and are
considering filing, learn more about this option and then consult with
an experienced bankruptcy lawyer to get an expert opinion on Chapter 13.
Don't worry about the initial costs since most initial consultations are
free.
