Basics Of Chapter 13 Bankruptcy Law

When you file for Chapter 13 bankruptcy, you agree to pay off some or all of your debts through a payment plan. This payment period lasts between three to five years. Chapter 13 differs from Chapter 7 bankruptcy, where the debtor's assets are sold, and the proceeds are used to pay creditors. Here are some rules for Chapter 13 bankruptcy.

Requirements for Chapter 13 Bankruptcy

Chapter 13 bankruptcy only applies to people who don't exceed a certain amount of secured and unsecured debt. If your debt is too high, you may still qualify for Chapter 11 bankruptcy.

Additionally, if you file for Chapter 13 bankruptcy, you should prove your income is sufficient for your monthly household obligations and the amount under the monthly payment plan. The court will not approve your payment plan if you don't have any income or if your income is too low. 

Lastly, Chapter 13 bankruptcy isn't meant for businesses. This bankruptcy applies to individuals. Therefore, a sole proprietor or a small business owner who files individually will qualify.

Credit Counseling Course

Before filing for Chapter 13, you must complete a credit counseling course. This session determines whether your income is sufficient to repay your creditors. The U.S. Trustee Program should approve the course. While you can get the counseling for free or at a discounted rate, the charges can be $50 or less.

Meeting of the Creditors

After filing for Chapter 13 bankruptcy, your creditors will get a notice of the date of the meeting of creditors. During this meeting, you will be required to answer questions from the trustee regarding your finances and the conditions of the repayment plan.

After the meeting of creditors, a confirmation hearing will be scheduled to approve your repayment plan. Creditors will be given a chance to reject your plan. The judge will confirm the plan if the trustee acknowledges your plan and your creditors agree.

Chapter 13 Payment Plan

The payment plan can run for up to 60 months. The payments may include money for past-due taxes, unsecured creditors, and past-due home mortgages. It could also include house or car payments and attorney fees.

The Chapter 13 payment plan is meant to help you pay for unsecured debts like credit cards and medical bills. It is also convenient for clearing past-due house mortgage, child support, alimony, and income tax. Chapter 13 also helps you save non-exempt property from liquidation.

In Closing

Chapter 13 bankruptcy gives you time to pay off your debt without being harassed by your creditors. Before filing and creating a payment plan, consult a Chapter 13 bankruptcy lawyer. It is also advisable to involve them throughout the process to ensure you get the best terms. 

For more information about chapter 13 bankruptcy, contact a local firm.