Chapter 13 Bankruptcy is often referred to as the Wage Earner’s plan. Chapter 13 allows the debtor to keep all of his assets and spread the payments over a period of time. This law is to allow the debtor to make a fresh start, and not be punished for inability to pay debts. It is a reorganization plan for those with a reliable source of income and simply need more time to pay the debts. The plan will adjust the debts to be paid over an extended period of time, normally within three to five years. While Chapter 7 Bankruptcy is discharged within several months, Chapter 13 usually takes three to five years for all the debt to be paid. Any bankruptcy case is complicated, and you should consult a bankruptcy lawyer for help rather than tackle it yourself.
To file Chapter 13 bankruptcy, one must be willing to work with the Court to develop a payment plan and hold to that plan for the next three to five years. Having a bankruptcy lawyer at your side makes this much easier. The plan must be in the best interest of the creditors and debtor to qualify. For unsecured debt, the plan must pay unsecured creditors at least what they would have paid if filing Chapter 7 Bankruptcy. Most unsecured creditors receive nothing in Chapter 7 Bankruptcy, so this qualification is usually met. As in Chapter 7 Bankruptcy, certain debts must be paid in Chapter 13 Bankruptcy, such as child support or taxes, but it allows the payments to be spread over time.
Chapter 13 Bankruptcy allows the debtor to repay secured debts, such as a mortgage, even if you are behind on payments, without fear of the property being repossessed. Past due payments may be put into the debt repayment plan to be paid off over a period of years. This allows the debtor to cure defaults on debts.
To be eligible for Chapter 13 Bankruptcy, the debt must be under certain limits for filing. A Groce & DeArmon, P.C bankruptcy lawyer can review your debt to see if you qualify according the Bankruptcy Court’s limits.
There are a few restrictions with Chapter 13 bankruptcy. A debtor may only incur substantial debt with court approval and must maintain insurance on any collateral.
Under the Bankruptcy Code, debtors are required to complete credit counseling education before filing for bankruptcy and post-bankruptcy counseling education before the discharge by the Bankruptcy Court. This must be completed through a non-profit, Court approved agency that provides credit counseling.
Contact Groce & DeArmon, P.C. for a free consultation to see if you qualify.