If you are constantly dealing with so much debt and expenses that you just can’t keep up, but you do have a job or other source of regular income that you can use to make payments under a repayment plan, Chapter 13 bankruptcy may be the right option for you. Even in most Chapter 13 plans some debts may be able to be liquidated. Other debts are set up in a reasonable debt repayment plan providing you a manageable way to make your monthly obligations and repay your creditors. Here’s an overview of the Chapter 13 process.
Your Chapter 13 bankruptcy attorney
Although the law provides that you can handle a Bankruptcy proceeding on your own, the new laws are complex, and lets face it your financial future is important. You should retain an experienced attorney whose specialty is personal bankruptcy cases. You’ll find that Eron and his staff are familiar with the crucial step of assessing your specific financial situation. We will guide you through the entire process, presenting you with all your options so you can make an informed decision.
The filing of your bankruptcy petition
Your Chapter 13 case begins with the preparation and filing of your bankruptcy petition. This involves some of the same forms needed to file a Chapter 7 case. In the petition we prepare on your behalf we will detail certain personal information about you, your spouse, and your family. We will also include information regarding all of your income, your property, your expenses, and all debts (both secured and unsecured). Additionally, we will explain the specific exemptions to which you are entitled under the Federal and State laws (exemptions are the laws that prevent your creditors from taking your property away from you). After review of all documents, we will then file your bankruptcy petition with the bankruptcy court.
Before your case can be filed you must receive a consultation from a credit counseling agency. Under the new Bankruptcy Reform Act, before you file a bankruptcy petition, you are required to have a briefing from a certified credit counseling agency. We offer a certified on-line service right here in our offices for your convenience. This on-line service will explain financial management, the alternatives to bankruptcy, and how to do a budget analysis. Although there are some hardship exceptions to this rule, most debtors will have to get have this counseling.
After we file your petition the bankruptcy court clerk will send a notice of your bankruptcy case to all of the creditors listed in your petition. Your case will then be assigned to a bankruptcy trustee who will be responsible for the review of your case. The court will also issue an “Automatic Stay” that prohibits most of your creditors from taking any further action against you outside of bankruptcy court. This action is designed to:
- Stop calls and bills from creditors.
- Protect much of your property from seizure.
- Prohibit most creditor lawsuits against you.
- Prevent foreclosure of your home.
- Stop wage garnishments.
- Block the repossession of your automobile.
The Chapter 13 repayment plan
Your repayment plan is an agreement between you and your creditors in which your creditors may agree to forgive a portion of your debts, or at minimum agree to your commitment to repay your debts over time. The plan will require you to make regularly scheduled payments to the bankruptcy trustee (a federal official who is appointed by the court to oversee your case) who in turn makes the payments to your creditors. In most cases your repayment plan will last from three to five years. While you are making payments under a repayment plan, your creditors listed in the plan are required by law to abide by the terms of the plan, and are prohibited from taking any collection actions against you.
Not everyone qualifies for Chapter 13
Chapter 13 is not for everyone. You might qualify for a Chapter 13 bankruptcy only if you satisfy the following three requirements:
- You must have a regular source of income.
- You must be able to meet the terms of your repayment plan, the Bankruptcy Code requires that your income be “stable and regular.”
- You must have a certain amount of disposable income. The law requires you not only to have a “stable and regular” source of income, but also to have sufficient disposable income to fund your Chapter 13 plan. In other words, you must have income left over after your monthly expenses for basic needs to allow you to make your regular repayments in a timely fashion. There is no set formula for determining how much income is enough, and the courts have some flexibility in determining what is adequate. Most often the court will require you to submit a proposed budget to see if you can satisfy these requirements.
Your debts must not be too high. If your secured debts (which include loans that are secured by liens on your property, such as your home and auto loans, and even IRS tax liens) exceed $922,975, you are not eligible for a Chapter 13 bankruptcy. Also, your unsecured debts may not exceed $307,675 (unsecured debts are debts which you have not secured with any of your property as collateral-such as most credit card debt, personal loans, and utility bills).
If you don’t qualify for a Chapter 13 you may be able to qualify for a Chapter 7.
Benefits of Chapter 13
We will work closely with you to determine whether a Chapter 13 or Chapter 7 is best for you. This will depend upon many things including your income, your expenses, and the specific types of debts you owe.
Generally a Chapter 13 case will be better for you than a Chapter 7 if:
- You are behind in your payments for property that you want to keep after bankruptcy. For example, if you are late on your mortgage or automobile loan, and you want to get current with these payments and keep your property, you can do this under a Chapter 13 plan.
- You have any current tax debts. It is very difficult to discharge recent tax debts in a Chapter 7 plan. Even if you are able to discharge some tax debts through Chapter 7, if the IRS has any recorded tax liens against you, these liens will survive your bankruptcy and still be on your record.
- If you have nonexempt property you want to keep. Property that you would have to give up to your creditors were you to filing a Chapter 7. A Chapter 13 may allow you to keep non-exempt property.
- If you have received a Chapter 7 discharge within the previous eight years. You cannot file another Chapter 7 for eight years.
- To protect cosigners on your debts. If you had someone cosign on a personal loan for you prior to your bankruptcy, a Chapter 7 won’t protect your cosigner. In a Chapter 7 your creditors may choose to pursue the cosigner for the full amount of your debt. If you file Chapter 13 your cosigner will be fully protected from your creditors provided you continue to make your plan payments in a timely fashion.
- Consolidate your student loans. Although you can’t discharge your student loans in a Chapter 7 bankruptcy, you can include them in your Chapter 13 repayment plan and repay them over time.
Don’t hesitate any longer. There is no reason to be ashamed of having to file bankruptcy. Congress passed the bankruptcy laws so people just like you would have a chance to get their financial lives back together again. What’s the alternative? More and more calls from harassing creditors, fear of losing property that is important to you and your family, or just the possibility of what seems to be never-ending financial stress.
Millions and millions of Americans file for bankruptcy every year, all of them having the well-deserved second chance to put their financial life back in order. If you’re ready for that chance, pick up the phone and call our 24-hour hotline.