Many people consider bankruptcy court to be the last stop on the road to financial ruin; the only choice left when paying off debts appears unattainable. Even in bankruptcy, there is hope, and Chapter 13 of the federal bankruptcy statute provides the closest thing to a gentle landing.
Chapter 13 bankruptcy, often known as the Wage Earner’s Bankruptcy, permits persons with sufficient income to settle all or part of their obligations rather than face liquidation. It’s bankruptcy for those whose main issue is dealing with creditors’ requests for prompt payment rather than a lack of funds.
One of its most appealing aspects is the possibility of keeping your house after filing for Chapter 13 bankruptcy as long as you can pay your mortgage and any other amounts required by your Chapter 13 repayment plan.
People who file for Chapter 13 have three to five years to pay off their debts while devoting all of their discretionary income to debt repayment. Applicants can use this option to pay off unsecured debts while also catching up on missing mortgage payments. One of the most appealing benefits of this option is the ability to avoid property foreclosure. While keeping your house can be a huge relief, you’ll have to live under the watchful eye of a court-appointed trustee who will collect and distribute your payments for years.
The Functions of Chapter 13
Chapter 13 bankruptcy is similar to Chapter 11 bankruptcy, which enterprises typically use. In both circumstances, the petitioner proposes a reorganization plan that protects assets against seizure or foreclosure while also asking for debt forgiveness. They’re both different from a Chapter 7 bankruptcy, which liquidates all purchases except those specifically safeguarded.
There is no guarantee that filing for bankruptcy will wipe out all of your debts. Child support and alimony payments and most school debts, and some types of taxes are not dischargeable. However, bankruptcy can wipe off many other obligations, but it will almost certainly make it more difficult for the debtor to obtain money in the future.
An individual must have no more than $419,275 in unsecured debt, such as credit card bills or personal loans, to be able to file for Chapter 13 bankruptcy. They are also limited to $1,257,850 in secured debts, such as mortgages and vehicle loans. These numbers are updated regularly to account for changes in the consumer price index.
One of Chapter 13’s provisions permits you to halt a foreclosure attempt on your home. Any ongoing foreclosure procedures and payment of other outstanding obligations are suspended when a Chapter 13 petition is filed. This buys you time while the court analyses your strategy, but it doesn’t get rid of your debt. Hopefully, the bankruptcy plan will free up enough of your income for you to keep your home and make regular mortgage payments.
The Chapter 13 Methodology
To begin, locate a bankruptcy attorney who can give you a free consultation and filing estimate.
Filing costs and fees imposed by a bankruptcy attorney make up the cost of filing Chapter 13 bankruptcy. The bankruptcy court charges petitioners (or “debtors”) a $313 filing fee. They must also provide:
• A list of creditors and the number of their claims
• A disclosure of the debtor’s income, including the amount and sources of income;
• A list of the debtor’s property, including an accounting of all contracts and leases in the debtor’s name; and
• A breakdown of the debtor’s monthly living expenses.
• Tax documents, such as a copy of the debtor’s most recent federal tax return and a summary of any outstanding taxes.