What Is Chapter 13 Bankruptcy?
A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.
When someone files for bankruptcy under Chapter 13 of the Bankruptcy Code, their aim is to have the opportunity to repay some or all of the debts in their name, in better terms; for example, with lower or no interest. Unlike Chapter 7, which involves liquidation of assets, this process allows the debtor to use whatever income they may have in the future to pay off the creditors. Needless to say, filing Chapter 13 Bankruptcy is applicable for a debtor who does have a regular income, and thus can afford to apply for such adjustments, or reductions.
How Does Chapter 13 Bankruptcy Work?
While debtors are allowed to keep all of their property, the court approves a new interest-free plan for repayment. A written plan is created which gives details of all the transactions that will occur, and the time frame for the transactions. The repayment must begin within thirty to forty-five days after the case has started. The transitory stage of paying a trustee who then pays a creditor, as in Chapter 7 Bankruptcy, is usually eliminated with Chapter 13 Bankruptcy. Although, in some cases people may involve a trustee who would take care of disbursing money to the creditors as detailed in the plan. Also, according to the law the creditors must strictly adhere the repayment plan approved by the court and are in fact prohibited to collect any claims from the debtor.
The one advantage of Chapter 13 over Chapter 7 Bankruptcy is the full discharge option which is not applicable under Chapter 7 filing. For example, if a debtor manages to complete all necessary payments in the plan, he/she is given a full plan discharge. (There are a few exceptions to this case). Yet another advantage of the Chapter 13 filing is that a repayment can be created even if creditors disagree with it, as long as it is approved by the Court. Although, in all fairness the court also allows creditors to file an objection, if they have any.
Who Can File For Chapter 13 Bankruptcy?
The most important criteria for a person to be able to file for Chapter 13 Bankruptcy is that the individual must have a regular income. There are a few other criteria that must be met for filing a Chapter 13 Bankruptcy.
How Can I File For Chapter 13 Bankruptcy?
Jeremy Peck will guide you through the minutia and the complicated details of applying for a Chapter 13 Bankruptcy. Though, essentially, filing for Chapter 13 Bankruptcy entails the following:
- Determine whether Chapter 13 is the best solution for you.
- Prepare a budget.
- Examine individual debt to figure out whether it requires filing Chapter 13 bankruptcy, or if it can be tackled in some other way.
- Determine and implement methods of dealing with secured creditors.
- Devise a Chapter 13 plan and fill out the forms.
- Pay the filing fee and complete the process of filing the forms and pleadings.
- Attend whatever meetings you maybe required to attend; with the creditors, court hearings, etc.
- Obtain a discharge once the payments have all been made and the plan has been terminated.
To determine if Chapter 13 Bankruptcy is the right approach for you, call or email the Law Office of Jeremy F. Peck for a FREE INITIAL CONSULTATION.
