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13 Explained
Chapter 13 Bankruptcy
Filing for Chapter 13 bankruptcy is a way for an individual to get out from under debt while making arrangements to pay back a percentage of the debt over time.
This plan allows people who are still earning money to develop a repayment plan suitable for all parties concerned. The plan can last from 3 to 5 years depending upon the individuals monthly income. In other words if the debtor makes too much money the plan will last for 5 years. If the debtor makes far too little money the repayment plan will last for 3 years.
Advantages of Chapter 13
Chapter 13 allows individuals to save their homes unlike a chapter 7 liquidation. Arrangements can be made with banks to allow debtors to repay delinquent mortgage payments over time. Chapter 13 can also stop foreclosures and allow the individual to stay in the home. Additionally other secured debts can be extended over the chapter 13 period thus allowing the debtor to reduce these monthly payments. All chapter 13 payments are made to a trustee who then pays the creditors. Under chapter 13 protection creditors are not allowed to have contact with the individual.
Chapter 13 Eligibility
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $307,675 and secured debts are less than $922,975.
Individuals may not file if they have been previously involved in a chapter 13 filing at which time they did not appear in court. Also, individuals must have been seen by a credit counseling agency 180 days prior to the filing.
How Chapter 13 Works
A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court:
- schedules of assets and liabilities
- a schedule of current income and expenditures
- a schedule of executory contracts and unexpired leases
- a statement of financial affairs.
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:
- 1. A list of all creditors and the amounts and nature of their
claims;
- The source, amount, and frequency of the debtor's income;
- A list of all of the debtor's property; and
- A detailed list of the debtor's monthly living expenses, i.e.,
food, clothing, shelter, utilities, taxes, transportation, medicine,
etc.
Married persons not filing jointly must also provide their financial information so that the court may make a determination of the financial status of the household.
Once the claim is filed an order of protection is granted which will immediately stop creditors form collecting directly from the individual. If during a foreclosure proceeding your chapter 13 filing is complete prior to the foreclosure proceedings the foreclosure can be halted. The individual can then catch up on old payments and make the new scheduled payments on time.
If you need more information about Chapter 13 bankruptcy filings please contact us or use our resources section to find the help you need.