Chapter 13 Bankruptcy: Some Common Questions
Last week, our blog focused on Chapter 7 bankruptcy and some common questions about how the process works. While Chapter 7 filings are far and away the most common filings, there are also other avenues to file for bankruptcy, including filing under Chapter 13. While there are some similarities between Chapter 7 and Chapter 13 bankruptcy, the differences are much more noticeable and confusing. In today’s blog post, Groce & DeArmon, P.C. takes a look at some common questions about Chapter 13 bankruptcy.
What is Chapter 13 Bankruptcy?
In short, Chapter 13 bankruptcy is essentially a payment plan on debts for debtors who are able to pay. When filing for Chapter 13 bankruptcy, the debtor will propose a repayment plan to creditors, typically lasting three to five years. Income determines whether the repayment plan will be over a three year period or a five year period, with a few exceptions, but no plan is able to exceed five years.
For those income restrictions, the debtor’s plan will be three years if their monthly income is less than the applicable state median while it will be five years if their monthly income is greater than the applicable state median.
Do I Qualify for Chapter 13?
To qualify for Chapter 13, your unsecured debts must total less than $394,725 or your secured debts must total less than $1,184,200. There are also several things that will disqualify you. First, unlike Chapter 7, business entities are not eligible for Chapter 13 bankruptcy. Similar to Chapter 7, there are restrictions based on your bankruptcy history. If the debtor has discharged debt via Chapter 13 bankruptcy within the last two years or has discharged debt via Chapter 7 bankruptcy within the last four years, they are disqualified from a potential Chapter 13 discharge.
You also must prove that your income is sufficient to pay the debt.
Should I File Under Chapter 13?
As with Chapter 7 bankruptcy, this question is dependent on the individual situation. The biggest advantage of Chapter 13 bankruptcy is that you don’t have to liquidate your assets. Which means that people who file under Chapter 13 will not lose their houses or vehicles if they are able to complete the payment plan.
Another advantage is that debtors under Chapter 13 are able to reschedule secured debts and extend them under Chapter 13. The only exception would be your mortgage. So if you are able to make the payments, Chapter 13 is a viable and beneficial option.
Let Groce & DeArmon, P.C. Help
At Groce & DeArmon, we specialize in bankruptcy and can help advise you on Chapter 13 bankruptcy filing. We have a proven track record with bankruptcy dealings and want to help you find the right solution. Contact us today at (417) 862-3706, call us toll-free at 1 (800) 640-3706, or visit our website for more information.