All About Chapter 13 Bankruptcy
Bankruptcy is a word that when brought about, will trigger an array of mixed reactions. A multitude of people will view it as a stepping stone to financial ruin. People may opt to file for bankruptcy when faced with a financial crisis. The reason for this would be to get debt waivers. The above falls under Chapter 7 of the bankruptcy code, where most of their assets get liquidated.
This is, however, not an option for some other people. There are those that have a significant amount of money and would not want to lose some or all of their valuable assets to creditors. It would be liberating to know that in the above case, you could file for Chapter 13 bankruptcy.
Chapter 13 bankruptcy, also referred to as a wage earners plan is whereby the debtor proposes to pay the creditors in monthly installments. These installments run for a minimum period of 3 years to a maximum period of 5 years. The main advantage of filing for Chapter 13 bankruptcy is that it offers debtors a chance to reorganize themselves by making affordable and manageable payment plans.
When we consider the repercussions of filing for Chapter 7 vs Chapter 13, the latter will give debtors a softer and steadier landing. It has, however, a more complex filing process.
Basics Of Chapter 13 Bankruptcy
Chapter 13 bankruptcy protects petitioners against closures or repossessions of some assets. Some debts will also be forgiven.
It is also crucial to note that there are debts that cannot be waived, such as-
- Unpaid taxes
- Student loans
- Child support
- Alimony payments
When a debtor files for Chapter 13, the court suspends any home foreclosure proceedings and any other ongoing debt collection processes. During this time, the plaintiff has an opportunity to figure out what to do and re-strategize. The plan is to have the court lift some debts out of their income so that they are able to make regular mortgage payments.
Who Qualifies For Chapter 13?
In recent times, the Chapter 13 bankruptcy claim has undergone numerous changes in its execution. There are various guidelines for managing it.
In most cases, any persons that are self-employed or otherwise, as long as they do not own corporate businesses, are eligible to file under Chapter 13. These debtors are individuals who can prove to the court that they have the means to pay their outstanding debts to creditors. They are required to disclose their various sources of income 14 days from the date of the filed petition.
Another thing that would determine Chapter 13 bankruptcy eligibility is whether or not you have updated your taxes. Relevant proof from tax authorities will be needed to confirm the above. Failure to which, the case will be delayed or dismissed.
There is also a small group of people that do not qualify for Chapter 13, these are-
- Sole proprietorships
- Commodity brokers
What Follows Chapter 13 Bankruptcy
After the court has approved the petition, the debtor is required to uphold their end of the bargain. Failure to which, there will be further review of the matter in court. The above may result in repossession and foreclosure of the debtor’s valuable assets.
Filing for bankruptcy under Chapter 13 causes questionable credibility. Financial institutions will not be willing to lend you financial aid.
Filing for bankruptcy may be a financial benefit if the debtor has many debts and is in fear of losing their home. Questions on filing for bankruptcy? At Bartifay Law Offices, we have extensive experience with Chapter 13 and can help you every step of the way.