For some, the last stop on the highway to financial ruin is the bankruptcy court. But when looked at in another perspective, bankruptcy isn’t the final nail in the proverbial coffin, and chapter 13 of the federal bankruptcy code gives a sort of reprieve.
How Chapter 13 Works
Chapter 13 Bankruptcy gives the opportunity to borrowers repay all or part of their debts under a more manageable repayment plan. One of the more attractive features of Chapter 13 is the fact that you are allowed to keep your home, vehicle, and other property purchased with a loan. The loans for each are wrapped into your settlement plan and so long as you keep up with your required payments, you maintain ownership.
Plan of Reorganization
Under Chapter 13, the petitioner submits a plan of reorganization (or debt repayment plan) that protects assets against foreclosure or repossession by creditors, and requests forgiveness of other debts (i.e. unsecured credit card debt).
In Chapter 13, the debt repayment plan is typically administered over a minimum of three years and up to maximum of five years. During this time the borrower is to dedicate all income, after expenses deemed a necessity have been paid, to the repayment of their consolidate debts.
Court Assigned Trustee
A court appointed trustee is assigned to your case and handles the distribution of your payments to each of your creditors. The trustee also serves as a point of contact between creditors and yourself (or your bankruptcy attorney). Once bankruptcy has been filed, creditors must stop all collection actions against you. In return, when you Chapter 13 Bankruptcy is granted, you guarantee on time payments in full. If you fail to uphold your end of the Chapter 13 Bankruptcy Agreement, then creditors may resume collection actions against you.
Bankruptcy Court Review and Hearing
The bankruptcy court carries out a thorough review of the debts and income statements, schedules a meeting with the creditors, and then plans a hearing to determine the acceptability of the plan. After the completion of the repayment agreement, the Chapter 13 case will be discharged.
Debt Exclusions In Bankruptcy
It is important to note, that no bankruptcy filing can actually eliminate all debts owed. There are some non-dischargeable debts like child support, student loans, alimony, and unpaid taxes – meaning they can’t be eliminated or consolidated.
Qualifications For Chapter 13 Bankruptcy
The eligibility criteria for the Chapter 13 Bankruptcy is that an individual must not have above $394,725 in unsecured debt (i.e. credit cards and personal loans), and also, they shouldn’t have above $1,184, 200 in secured debts (i.e. mortgages or vehicle loans). It should be noted that these figures are subject to periodical adjustments according to the changes observed in the consumer price index.
In addition, borrowers apply for Chapter 13 bankruptcy must be able to provide document income and means to be able to pay down the loans at a more manageable rate or monthly payment.
Additional documentation may be requested, such as proof of tax filings, and Chapter 13 Bankruptcy provides a limited time in which to respond to the request of such information. Hiring a bankruptcy attorney who is familiar in the processes of the Bankruptcy Courts can greatly help borrowers adhere to strict timelines and ensure all paperwork that has been requested is properly submitted.
Compassionate bankruptcy attorneys guide clients through their most challenging financial decisions.
Bankruptcy lawyer, Michael McGinn, genuinely cares for his clients and is willing to walk them through every step of their bankruptcy process. It is his passion to help hard-working individuals through their most trying legal challenges and aide them in finding the solution that is right for them. To schedule your free and confidential legal consultation with a skilled bankruptcy attorney call the office at 813- 374-0353 or contact us online. We look forward to working with you soon.