Chapter 13 bankruptcy is a form of bankruptcy that allows a person to reorganize his financial situation. Those who file for Chapter 13 keep their property and their assets but a debt repayment plan is created to repay the secured debts such as cars or furniture, or catch up house payments, usually at a lower payment schedule. The repayment plan lasts 3 - 5 years with the goal of discharging unsecured debts upon completion of plan payments, but their debts are not entirely forgiven as they are in Chapter 7 bankruptcy. Instead, filers pay back a portion of their debts (generally secured debts) over a three- to five-year period, after which the rest of their unsecured debt will be wiped out.
Qualifications for Chapter 13 Bankruptcy
The central factor in Chapter 13 bankruptcy is the repayment plan for your debts. The payment plan is court-ordered and provides specific details on when, how, and how much you will pay each of your creditors every month. If you make all of these payments faithfully for the term of your bankruptcy, the remainder of your debts will be discharged, and you will owe nothing else to these creditors.
Not everyone is a good candidate for Chapter 13. You may be ineligible for Chapter 13 bankruptcy if:
- You do not meet income requirements. Chapter 13 requires debtors to make enough income each month to pay their secured debts, such as a car or house. If you do not earn enough or your income is not steady, the bankruptcy court might not allow you to file for this type of bankruptcy.
- You owe too much money. Debtors may be disqualified for Chapter 13 if their outstanding debts are too high. In 2016, the courts required a filer to have less than $1,184,200 in secured debts and less than $394,725 in unsecured debts to file for Chapter 13—and these amounts change from year to year.
We can help you decide whether Chapter 13 or Chapter 7 bankruptcy is the best option for you and your family. Call us today or fill out your contact information to speak to Valerie G. Long about your financial future.