Beginner’s Guide To Chapter 13 Bankruptcy
8Last week, we spent our time discussing Chapter 7 bankruptcy and went through a beginner’s guide on how to approach it. This week, we will look at Chapter 13 bankruptcy, which is a chapter that is often utilized because of a Chapter 7 filing. What’s important to remember is that bankruptcy isn’t an add-on to current debt. In fact, it is quite the opposite. There are many Chapters of the Bankruptcy Code that work to get you debt free.
However, each chapter works towards that goal differently. While Chapter 7 focuses more on debt removal, Chapter 13 bankruptcy focuses on repayment. Where Chapter 7 works to pay off debts through nonexempt assets, Chapter 13 helps you to organize your finances and establish a payment plan. In today’s post, Groce & DeArmon will break it down.
What Is Chapter 13 Bankruptcy?
What makes Chapter 7 and Chapter 13 bankruptcy similar is that they both end with a discharge of debt. With Chapter 7, that comes from forfeiture of assets. With Chapter 13, that comes from establishing a payment plan, anywhere from 3-5 years long, that helps you pay your debt back. Chapter 13 includes a significantly longer process than Chapter 7, but it doesn’t require the loss of property.
All Chapter 7 filers go through something called a means test, which is there to determine whether the debtor has the means to go through the Chapter 13 process.
How Does Chapter 13 Work?
As noted previously, it starts for some people with a plan to file for Chapter 7. If it is determined by the means test that you can afford a payment plan, you can be moved to Chapter 13 bankruptcy. From that point, you will have a payment plan developed to which you pay monthly installments to your trustee for 3-5 years. The trustee distributes that money to the creditors you owe.
It is an easier process than Chapter 7, but it is also a longer process. Chapter 7 filers can be done in as little as six months, while Chapter 13 bankruptcy filers will be in it for up to half a decade.
Am I Eligible For Chapter 13?
The biggest eligibility requirement for Chapter 13 bankruptcy is income. The court will want to see that you have the income capability to make your monthly payment, so you will have to prove your employment and show your tax filings. You are also required to file as an individual and not as a business.
Contact Groce & DeArmon For More Information
If you want to avoid forfeiting assets and have the disposable income to take on monthly payments on your debt, Chapter 13 bankruptcy might be your best option for repaying debt. Contact Groce & DeArmon at (417) 862-3706 or get in touch with us online today.