Chapter 13 Bankruptcy
People who file for Chapter 13 bankruptcy agree to use their extra income to pay their creditors over a period of three to five years, in exchange for relief from their debts. At the end of the plan, this process cancels whatever debts remain.
This type of bankruptcy is ideal for people with a stable income and secured debt, such as mortgages and financed cars, because it allows them to retain their assets during repayment.
Eligibility For Chapter 13 Bankruptcy
There are certain requirements an individual must meet in order to be eligible for Chapter 13 bankruptcy:
- You need to adhere to the debt limits: In Chapter 13 bankruptcy, there are maximum amounts for secured and unsecured debts. A secured debt example is a house or car, where creditors can take the property if you fail to repay the loan. Unsecured debts include things like credit cards or medical bills. To qualify, an individual should not have more than $1,184,200 in secured debts and $394,725 in unsecured debts. The claims process considers the value of your assets.
- You must have a steady income: When applying for Chapter 13 bankruptcy, you must demonstrate to the Court that you can cover your monthly household expenses and contribute to a repayment plan. If your income is insufficient, the Court will not approve the plan.
- Only individuals can file: Chapter 13 bankruptcy does not serve businesses, so only individuals can file. Your repayment plan will include any business-related debts for which you are personally liable.
Steps For Filing Chapter 13 Bankruptcy
1. Find a bankruptcy attorney.
2. Provide the following to the Court within 14 days of filing a petition:
– A list of creditors and the amount of their claims
– Disclosure of the amount and sources of the debtor’s income
– A list of the debtor’s property
– A breakdown of the debtor’s monthly living expenses
– Tax information
3. Propose a repayment plan for the Court to approve. The Court will look at your debts and income, talk with creditors, and set up a hearing to decide if the plan is okay.
Repayment Under Chapter 13
Under Chapter 13 bankruptcy, a debtor will repay the following:
- Priority debt: Chapter 13 requires filers to pay priority claims in full. Examples include child support and alimony, student loans, and unpaid taxes.
- Secured debt: You must pay secured debts, such as a house or a car, in full in Chapter 13 bankruptcy, either through the repayment plan or outside of it.
- Unsecured debt: You may have to repay unsecured debt, such as credit cards and medical bills, depending on your disposable income.
While bankruptcy can give financial relief to those in debt, it will penalize the debtor’s credit. Credit reporting agencies will list a Chapter 13 bankruptcy on the debtor’s credit report for 7 years.
We’re Here To Help
If you are considering filing for bankruptcy, contact our attorneys today. We have an office in Phillipsburg, and we practice law in both Pennsylvania and New Jersey.
Call our office at 908-454-3200, or you can reach us online with any questions you may have. We are here to help you regain financial stability.
Wilhelm & Roemersma, P.C., is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.