Chapter 13 Bankruptcy
When you find yourself struggling to make minimum payments, mortgage payments, and you just cannot seem to catch up on your bills, bankruptcy can be the much needed relief you are looking for. Financial struggles fall upon all of us. In these times of money troubles, the law provides bankruptcy as an opportunity for many to find a fresh financial start. After Chapter 7, Chapter 13 Bankruptcy is the most commonly filed bankruptcy type for individuals. If you are overwhelmed by debt and money owed continues to exceed money made, talk to the bankruptcy attorneys at Fazli & Associates. We can help go through your legal options and offer you a lifeline to a brighter financial future through bankruptcy.
How Does Chapter 13 Bankruptcy Work?
Chapter 13 bankruptcy, also referred to as a “wage earner’s plan,” allows certain qualifying individuals to reorganize finances and establish a payment plan in order to make outstanding bills more manageable. Unlike Chapter 7 bankruptcy, there is no need for assets and other property to be sold off in order to satisfy creditor claims. Instead of debt elimination, Chapter 13 bankruptcy is more about establishing a repayment plan that the debtor can handle and that works towards satisfying outstanding creditor claims.
In Chapter 13 bankruptcy, the debtor, the person who filed for bankruptcy, must submit to a repayment plan. Essentially, the debtor’s bills are consolidated. A repayment plan is established based on how much is owed, what kind of debts are owed, the debtor’s income, and the reasonable and necessary expenses the debtor pays each month. Payments are made to a Chapter 13 bankruptcy trustee for 36 to 60 months. The trustee then in turn disburses that money to creditor’s who filed valid claims.
What are the Advantages of Chapter 13 Bankruptcy?
The main advantage of Chapter 13 bankruptcy is the fact that it allows an individual to halt collection efforts and save valuable assets, their home included, from being sold out from under them. Filing Chapter 13 bankruptcy can put a stop to foreclosure proceedings. The debtor will then be allowed to cure delinquent mortgage payments over the length of the scheduled bankruptcy repayment plan. The debtor will also be permitted to reschedule secured debts in a way that allows them to pay them off, often at a lower rate, over the length of the repayment plan. As soon as Chapter 13 bankruptcy is filed, collection efforts from creditors stop. Collection efforts are not allowed during the repayment period as well.
While debt collection efforts come to a halt, Chapter 13 also means an individual will not have to have any direct contact with creditors. Chapter 13 bankruptcy operates much like debt consolidation through the use of a consolidation loan. The debtor only makes payments to the Chapter 13 trustee who then distributes payments to creditors. In addition to these benefits, Chapter 13 also includes a special provision which protects third parties who may be liable along with the debtor on certain consumer debts. This means that bankruptcy protection may be extended to co-signers.
Last, but certainly not least, Chapter 13 may be available even in cases where an individual makes too much money to qualify for Chapter 7 bankruptcy protection. In Chapter 13 bankruptcy, unlike in Chapter 7, property is not sold off in order to satisfy creditor claims. This is another reason why many choose to file Chapter 13 as opposed to Chapter 7 bankruptcy.
Am I Eligible for Chapter 13 Bankruptcy?
While Chapter 13 bankruptcy has many benefits, it is not available to everyone. There is a debt limit, for starters. Secured debts and unsecured debts must not exceed a certain amount. A secured debt is one that grants creditor authority to take property should you fail to repay the debt. A creditor does not have this right with an unsecured debt. If your debts are too high to file Chapter 13 bankruptcy, Chapter 11 bankruptcy may be available to you.
You must also have steady income in order to qualify for Chapter 13. You will need to be able to prove that you have income that allows you to meet your monthly expenses and a payment plan repayment each month. Should your income be too inconsistent or too low, the bankruptcy court is unlikely to approve any proposed repayment plan.
Additionally, only individuals are able to file Chapter 13 bankruptcy. It is not available to businesses. Business related debts that you are personally liable for, however, are included in your repayment plan. This means that a sole proprietorship may be, incidentally, able to benefit from Chapter 13 bankruptcy protection.
Chapter 13 Bankruptcy Attorneys
The benefits of Chapter 13 bankruptcy are many, but it can be a complicated process. That is why Fazli & Associates is committed to our clients seeking bankruptcy protection. We will work with you to determine which type of bankruptcy is right for you. You do not need to suffer through financial difficulties alone. Let us help you find that much needed relief and a renewed sense of financial freedom. Contact us today.