Chapter 13 bankruptcy law is occasionally referred to as reorganization bankruptcy.  It’s very different than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy most all of your debts are cancelled out. But, you must forfeit any belongings that aren’t exempt from seizure by your creditors. Under Chapter 13 bankruptcy law, you don’t have to abandon any worldly items. But, you’re expected to utilize your income to pay back some or all of what you owe your creditors. Your payments to creditors are made over time, usually from three to five years. The time parameter depends upon the amount of your debts and income.

Chapter 13 Bankruptcy Law Eligibility

Chapter 13 bankruptcy isn’t for everybody. Chapter 13 bankruptcy law requires using your income to pay back some or all of your debt. So, you’ll have to exhibit to the court that you’re capable of fulfilling your payment responsibilities. If your income is irregular or excessively low, the court may not permit you to file under Chapter 13 bankruptcy law.

If your total debt load is too high, you’re also unqualified to file under Chapter 13 bankruptcy law. Your secured debts can’t be greater than $1,010,650. A “secured debt” is one that grants a creditor the right to take away a specified piece of property (like your home or automobile) if you don’t pay the debt. Your unsecured debts can’t be greater than $336,900. An “unsecured debt” doesn’t give your creditor the ability to take your belongings.  An example of an “unsecured debt” is a credit card or a medical bill.

The eligibility requirements of a Chapter 13 bankruptcy are covered in detail in Chapter 13 Bankruptcy: Keep Your Property & Repay Your Debts Over Time.

Beginning a Chapter 13 Bankruptcy

Prior to filing a Chapter 13 bankruptcy, you must complete credit counseling from an agency accredited by the United States Trustee’s office. These agencies are allowed to charge a fee for their services.  But, if you can’t afford to pay the fee, they have to provide cut rate counseling and, in a few cases, free counseling.

Chapter 13 Repayment Plans

The most significant component part of your Chapter 13 bankruptcy paperwork is your repayment plan. It identifies in detail how much money you’ll give to every one of your debts. There’s no standard form for the plan.  But, most all courts supply their own forms.  To learn more about Chapter 13 Bankruptcy repayment plans, read Chapter 13 Bankruptcy: Keep Your Property & Repay Your Debts Over Time.

How Much Will You Need to Pay

Your Chapter 13 plan must pay off certain debts in full. These debts are called “priority debts” because they’re viewed important enough to spring to the forefront of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax responsibilities.  In addition, your plan must address your usual payments on secured debts.

The plan must show that any income you have left over after doing these required payments will go to paying your unsecured debts.  You don’t have to pay these unsecured debts fully.  You only have to show that you’re giving any unconsumed income towards their repayment.

How Long Will You Make Repayment

The duration of your repayment plan hinges on how much you earn and how much you owe. If your standard monthly income during the six months before the date you filed for bankruptcy is greater than the typical income for your state, you’ll have to volunteer a five-year plan. If your income is less than the average, you may offer a three-year plan.

Regardless of how much you make, your plan ceases when you pay back each of your debts in full, even if you’ve not hit the three- or five-year mark.

What Happens If You Can’t Produce Plan Payments

If you encounter a job loss after initiating a payment plan or discover that you can’t maintain the payments on your Chapter 13 bankruptcy plan, the bankruptcy trustee may alter your plan.  It’s even possible that the court could grant the discharge of your debts on the basis of hardship.  Hardship may include the abrupt loss of a job due to a company shutting down or a serious debilitating illness.  If the bankruptcy court won’t allow you to alter your plan or give you a hardship discharge, you may be able to convert to a Chapter 7 bankruptcy. 

When Is a Chapter 13 Case Over

After you finish your repayment plan, every left over debt that’s eligible for a discharge will be canceled out. But, before you’ll be able to acquire a discharge, you must demonstrate to the court that you’re current on your child support obligations and that you’ve finished a budget counseling course with an agency approved by the United States Trustee. This budget counseling course is in addition to the compulsory credit counseling you fulfill prior to filing for bankruptcy






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