What is Chapter 13 bankruptcy and how can attorneys help you file it?
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.
How can our lawyers help you with Chapter 13 bankruptcy?
Once you contact us:
- You will work with my assistant, who will collect all the necessary financial information on your debts.
- I will review your file and analyze your financial status. According to your financial condition, I will suggest whether you will be eligible for the Chapter 13 repayment plan.
- My team will also determine the number of debts that are dischargeable along with property exemptions, if any, in Chapter 13.
- The court will inform your creditors once we file your case. Your creditors will also be notified when to attend the meeting.
- I will monitor what appears in the search results and help you get a positive online reputation.
- You will be debt-free in three to five years, considering your current monthly income, the total debt amount, and the number of debts you owe.
Why is hiring a bankruptcy attorney beneficial when filing Chapter 13?
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.
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What other services can my team offer you?
What is Chapter 13 bankruptcy?
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.
When can you file Chapter 13 bankruptcy?
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.
Who is eligible for Chapter 13 protection?
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:
- A consistent source of income is essential.
- An individual must submit current tax returns and payments.
- Unsecured debts, such as those incurred through unsecured credit cards and personal loans, cannot exceed $394,725 [11 U.S.C. § 109(e)].
- Secured debt, such as a mortgage or auto loan, cannot exceed $1,184,200 [11 U.S.C. § 109(e)].
- A person may not be eligible if bankruptcy was dismissed within 180 days due to a failure to appear in or comply with the bankruptcy court.
- A person must not get a Chapter 13 discharge during the previous two years, or from a Chapter 7, Chapter 11, or Chapter 12 bankruptcy within the previous four years [11 U.S.C. §§ 109(g), 362(d) and (e)]
- No person may opt for Chapter 13 or any other chapter of the Bankruptcy Code unless he or she has received credit counselling from an approved nonprofit credit counselling agency, either individually or in a group briefing, within 180 days before filing [11 U.S.C. 109 and 111].
How do you repay debts in Chapter 13 bankruptcy?
Not every debt will be settled, and it will usually be classified into three types.
- Priority debt - such as student loans, child support, and the majority of tax payments generally must be paid in full. In most circumstances, you cannot discharge tax debts in Chapter 13 bankruptcy. You should pay non-dischargeable tax obligations throughout your Chapter 13 repayment plan, which could take three or five years.
- Secured debt - such as a home or auto loan will be repaid over time. Any past-due payments can also be brought up to date.
- Unsecured debt - such as credit card bills are negotiable. They may be reduced, and any outstanding balances may be forgiven once the repayment plan is completed.
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.
Can you create your own Chapter 13 repayment schedule?
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:
- Your bankruptcy trustee, as well as how much money that creditor will receive each month.
- How you intend to deliver the funds to the trustee.
- How long the program will be in effect.
The petitioner also needs to compile the information necessary to prepare the associated forms:
- A list of creditors, including the debts and the nature of the debts
- The source, sum and frequency of the debtor’s income
- A list of all the debtor’s property
- A complete accounting of the debtor’s monthly living expenses
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.
How to prepare for Chapter 13 bankruptcy process
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:
- Completing credit counseling from an accredited nonprofit credit counseling provider, and complete debtor education course within 180 days after filing is required.
- An attorney can assist with the bankruptcy basics and preparation of the paperwork, which includes: a list of creditors and the amount owing to each, proof of income, a list of valuables and assets, a copy of your most recent tax return, a breakdown of your living costs, and a certificate of completion for the credit counselling course.
- File a bankruptcy petition with the local bankruptcy court, along with $310 in fees and an administrative fee of $75 to the bankruptcy court. This will put any debt obligations on hold for the time being. The court will issue an automatic stay that immediately stops all collection attempts and foreclosure proceedings until the repayment plan is complete.
- Within 14 days after filing the petition, provide a repayment plan. The strategy outlines how lenders will be reimbursed.
- Even if the court hasn’t yet accepted the repayment plan, you must begin following it within 30 days of filing the bankruptcy case.
- The court will appoint a trustee, who will conduct an investigation and meet with creditors.
- After you file the petition, the trustee will schedule a creditor meeting between 21 and 50 days later. During the meeting, you will be asked questions regarding your debt and repayment plan under oath.
- Within 45 days of the creditor meeting, you must attend a confirmation hearing. During the hearing, a judge will decide whether or not to approve the plan. If the plan does not fulfill the rules, you can try to alter it or convert the case to a Chapter 7 bankruptcy.
- Follow the payback schedule over a three to five-year period. During this period, the trustee will collect and disburse payments.
- The bankruptcy will be discharged once the repayment plan has been completed. You must also complete a debtor education course through an approved agency, and meet all other conditions.
What are the advantages of Chapter 13 bankruptcy?
Chapter 13 has several benefits over liquidation. Here are some of the major advantages of filing for Chapter 13 plan in United States:
- You can save your home: By filing Chapter 13, you may be able to save your home. Filing Chapter 13 may help you stop foreclosure proceedings. This might help you make delinquent mortgage payments over time.
- You can reschedule your secured debt: Another advantage of Chapter 13 bankruptcy is that you can reschedule your debt. That means extending the payment plan period, lowering the payments. For the most part, you may only reschedule secured debts and repay creditors, except for the mortgage on your primary residence.
- You won’t have direct contact with creditors: Filing Chapter 13 means you will effectively work under a trustee who will distribute your payments to your creditors, which means you won’t have to talk to them anymore.
- The plan is extensible: There are always provisions available to extend your Chapter 13 plan. That gives you a certain amount of flexibility, allowing you to adjust your bankruptcy to your individual situation.
- It acts like a consolidation loan: Finally, a major advantage of Chapter 13 is that it acts like a consolidation loan, making it a convenient way to pay off your debts without being harassed by creditors and collection agencies.
What impact will a Chapter 13 case have on your credit score?
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.