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What is Chapter 13 Bankruptcy?

By: Louise Harris

 

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It is an overwhelming feeling to be in debt. Many people are working hard, living paycheck-to-paycheck, and still can barely manage the minimum payments on their monthly bills. Sometimes, it feels like you are underwater but cannot swim back to the top for air.

If you feel that your debt problems are out of control, declaring bankruptcy can be a life preserver.

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Chapter 13 is a type of bankruptcy for individuals under the United States Bankruptcy Code. It offers individuals a chance to restructure their debt and repay their creditors. It allows people to restructure mortgage payments, car payments, credit card debt, tax debts, medical bills, etc. If you feel hopelessly burdened by your debt, Chapter 13 could be the solution for you. Read here to learn more about the process of filing for bankruptcy in New York.

Who can qualify for Chapter 13 Bankruptcy?

Only individuals or sole-proprietors (not businesses or corporations) can qualify for Chapter 13 protection. The Chapter 13 bankruptcy law is also called the “Wage Earner’s Plan.” Accordingly, one must be earning a regular income to be eligible. Chapter 13 does not completely get rid of debt but can consolidate it and break it up into manageable payments. After filing for federal bankruptcy, you will propose a plan on how to repay your creditors. A federal judge must approve the plan, and the payments will last anywhere from 3-5 years.

Additionally, Chapter 13 has strict debt limits. One’s unsecured debts (debts not backed by collateral) must be under $419,275; secured debts (debts backed with collateral) must total under $1,257,850. If your debts surpass these limits, you cannot qualify for chapter 13.

If you are a “wage earner” and in debt within the federal debt limits, you could have the option to use the Chapter 13 law to help. Discuss your options with a New York bankruptcy attorney on how to proceed.

What will my repayment be in Chapter 13 Bankruptcy?

A New York Chapter 13 bankruptcy lawyer advises that a repayment amount can depend on many factors. There is no straight answer. The repayment amount will consider the individual’s median monthly income, their monthly disposable income (the amount of money remaining after living expenses are paid off), their monthly expenses, and any assets they hold. The payments will be interest-free for the duration of the restructuring plan.

How to file for Chapter 13 bankruptcy?

Filing for bankruptcy is a complex legal process.  Not only are there rules and regulations to deal with, but one must have to figure out mathematics and structure finances. The process involves a lot of deadlines, paperwork, and attention to detail. An experienced and knowledgeable chapter 13 bankruptcy attorney can help you with these important steps to secure your financial freedom.

A debtor filing for bankruptcy must file documentation of all income, debts, and assets to the federal bankruptcy court. It is an intense process and requires due diligence. There are many advantages to working with a chapter 13 bankruptcy attorney, as they can help you with all the information required and the proper forms.

After gathering all the required information, your bankruptcy lawyer will help you file your bankruptcy petition in federal court. This will include creating a restructuring plan and payment plan that you will propose to the judge for their approval.

Chapter 13 Bankruptcy Attorney Advantages

If you are in debt, Chapter 13 bankruptcy might help you reorganize your finances and your life.  With a trusted Chapter 13 attorney by your side, you can have a fresh start.

Published: June 26, 2022
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Louise Harris

Louise Harris is a co-founder of Christian Marketing Experts and a marketing specialist working with various brands online such as PSD to WordPress, Gospeletters, and many more. She is devoted to helping small businesses bridge success gaps by providing in-depth, actionable advice on digital marketing, SEO, and small business growth. Visit her book list here.

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