If you are going through hard times financially, and having trouble meeting your debt obligations, there are several options available to you. You must be careful to get sound advice from appropriate professionals, as there are many financial service companies preying on vulnerable people, and getting involved with them may leave you worse off. One such option you might consider is chapter 13 bankruptcy, and here are some frequently asked questions. If you think you may pursue this option, schedule an appointment with a bankruptcy attorney as soon as possible for guidance.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a process where a debtor agrees to repay all or a portion of his debts as arranged through the federal bankruptcy court. You will not incur any penalties or interest, and money is paid to a trustee appointed by the court, who then distributes it to your creditors. Certain debts may need to be repaid in full, while other debtors may only receive a small portion of the entire debt. Repayment takes place over a period of three to five years, and once the debtor has successfully completed it, he is no longer responsible for any remaining debts that are eligible for discharge.
Who is Eligible?
There is a set of requirements that must be met to be eligible to apply. You must live in, do business or have property in the US, have regular income, unsecured debts of less than 336,900, secured debts less than 1,010,650 dollars, not a stock or commodity broker, have not intentionally dismissed a bankruptcy case in the last 180 days, and has undergone credit counseling from an approved agency within the last 180 days. If eligible, you would have to apply the means test to see if you qualify based on your income, expenses, etc…
Why Would You Choose Chapter 13 Bankruptcy?
Debtors have two options when it comes to declaring bankruptcy, the other being chapter 7, where all qualified debts are discharged, and you are not responsible for paying back any of it. If you are in financial straits, this may sound preferable, but it is not always the best option. When declaring chapter 7, any property not exempt from liquidation—if it exists—is used to help pay down the debt. If you have any non-exempt property that you deem valuable and would likely lose in a chapter 7 filing, chapter 13 would be a better route. Though, in some cases, people need to sell their property because of insufficient income. Other reasons you would pursue this option would be a desire to repay your debts, making too much money to qualify for chapter 7, having significant debt that is dischargeable under chapter 13 but not 7, having sufficient assets to repay the debt, but needs temporary relief from creditors, or having filed chapter 7 within the last eight years.
What Debts are not Eligible for Discharge?
There are several debts that cannot be included from discharge. They include debts that you were paying back outside the plan, alimony, child support, money owed to injured parties as a result of drunk driving, tax debts incurred within three years, restitution, fraud, student loans, damages from civil cases resulting from malicious conduct, new debts that you incurred after the plan and debts from creditors who were not notified of the Chapter 13 filing.
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