A Chapter 13 bankruptcy plan aims to prepare a court-approved debt repayment plan for those individuals who have sufficient income and can repay some or all of their debts over a period of time.
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It is preferable to consult with an experienced lawyer who can assist you with Chapter 13 eligibility and protection. The average person may have difficulty grasping the concepts of bankruptcy, even if they know the basics.
A minor error during the filing procedure, or a simple breach of the bankruptcy regulations, could cause your bankruptcy filing to be delayed. It is equally possible that the court will reject it. So, you should seek the help of a professional who can guide you and ensure that you follow all the laws outlined in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).
These are several benefits if you choose a qualified bankruptcy attorney. Bankruptcy attorneys can help you eliminate debt successfully. Hiring a lawyer saves you time and protects you against creditor abuse. A bankruptcy professional is more knowledgeable about the law than you are. They can handle the paperwork better and also negotiate with creditors more skillfully. That’s why they have a better chance of success. Usually, a reputed attorney will not commit fraud and may provide customized legal assistance. They handle your Chapter 13 case with professionalism and give you peace of mind.
Chapter 13 bankruptcy is a lawful approach that allows people to settle their debts over time while retaining valuable assets. A Chapter 13 bankruptcy is popularly known as a wage earner’s plan. It enables people with regular income to create a plan to return all or a portion of their debts. Debtors offer a debt repayment plan to creditors in installments over three to five years under this chapter. If the debtor’s current monthly income is less than the applicable state median, the plan will last three years unless the court grants an extension “with cause.” If the debtor’s current monthly income exceeds the applicable state median, the plan must typically last five years.
A plan may not provide for payments to be made for more than five years [11 U.S.C. § 1322(d)]. During this chapter case, creditors are not permitted to begin or continue collection activities.
Some of the most typical reasons debtors file bankruptcy are when they are drowning in huge debt burdens, such as credit card debt, payday loans, medical bills, or other critical unsecured debts that they cannot pay off. They might have attempted several times to get debt relief but failed to resolve their debt issues due to the lack of a proper debt management plan. They might have a decent disposable income but not a solid emergency fund to meet the financial crisis. As a result, they are at risk of losing assets to creditors. Another good reason for filing bankruptcy is unemployment, with no hope of finding a job soon.
As long as the total debt is less than the minimum level, anybody with a regular income can file bankruptcy petition.
The repayment plan’s timeline is influenced by the individual’s income level.
Here are some Chapter 13 bankruptcy eligibility criteria to fulfill if someone considers filing for it:
Not every debt will be settled, and it will usually be classified into three types.
Chapter 13 bankruptcy can make the debt more bearable by spreading repayment over several years and allowing filers to save valued assets such as homes or vehicles from foreclosure or repossession.
Debtors in Chapter 13 can create their repayment schedules with the court’s consent. The plan is an essential component of this process, and it is documented on either a federal Chapter 13 bankruptcy form or one from a local court.
The strategy illustrates:
The petitioner also needs to compile the information necessary to prepare the associated forms:
If the petitioner is married, they must gather this information for their spouse regardless of whether they are filing a petition together, individually, or if only one spouse is filing. Even if one spouse is filing, the income and expenses of the non-filing partner is required so that the court may get a clear picture of the household’s financial situation.
The official Chapter 13 bankruptcy forms can either be purchased from legal stationery stores or downloaded from - https://www.uscourts.gov/forms/bankruptcy-forms. The bankruptcy court doesn’t provide the forms.
From the filing of the petition through the approval of the repayment plan, the Chapter 13 filing procedure typically takes 95 days. However, the bankruptcy will not be discharged until the three to five-year plan is completed.
Here’s what to expect during a typical Chapter 13 bankruptcy case:
Chapter 13 has several benefits over liquidation. Here are some of the major advantages of filing for Chapter 13 plan in United States:
A Chapter 13 plan will remain on your credit report for 7 years from the date you file. Although this chapter bankruptcy filing may have an initial negative impact on your credit score, it tends to improve over the life of the payment plan. After 7 years, all other negative reports on your credit file (like late payments on credit cards, foreclosures, etc.) must be removed.
Compared to Chapter 7 bankruptcy, your credit takes a smaller hit with Chapter 13. However, some limitations, including the inability to get a high credit limit or borrow large amounts of money, will be there until the bankruptcy completely disappears from your credit report.
Last Updated on: Tue, 14th Sep 2021