Chapter 13 Bankruptcy

What is Chapter 13 bankruptcy and what are its pros and cons?

Filing Chapter 13 bankruptcy can benefit you if you have failed in all your attempts to get rid of your outstanding debt. With the help of Chapter 13, you can avoid foreclosure and also repay some or all of your debts over a specific time period; it usually takes 3 - 5 years to repay your multiple debts. Chapter 13 is also referred to as reorganization bankruptcy or a wage earner's plan.

When do you need to file Chapter 13?

Filing Chapter 13 would be helpful to you if you're experiencing one or more of the following situations.

• You want to protect your assets from liquidation.
• You want to pay off your secured debts.
• You're not able to pay your monthly mortgage payments.
• Your property lien is more than the value of your collateral.
• You're not able to discharge your debts by filing Chapter 7 bankruptcy.
• Your income is much higher than what is required for filing Chapter 7.

What are the eligibility criteria?

You need to satisfy some factors in order to qualify for filing Chapter 13. The eligibility criteria are as follows.

• You should have a regular income so that you can make your monthly repayments.
• You should've enrolled yourself in a credit counseling session within past 6 months before filing bankruptcy.
• According to the bankruptcy rules, you shouldn't have exceeded USD 307,657 and USD 922,975 in your unsecured and secured debts respectively.
• You gross monthly income is required to be more than the State Median Income of your family size.
• You cannot file Chapter 13 within 2 years from the previous filing; you need to wait for 4 years if you've filed Chapter 7 previously.

How does Chapter 13 bankruptcy function?

As a debtor, you need to prepare a repayment plan and attach the proposal along with your bankruptcy documents while filing Chapter 13. Then, you should send the proposal to all your creditors. Your repayment plan should comprise of all your debts, that is, the priority claims along with your secured and unsecured debts.

chapter 13 bankruptcy