Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is Entitled Adjustment of Debts of Individual with Regular Income or commonly known as the Repayment Plan. Chapter 13 bankruptcy allows you to keep valuable assets, and save your house because it allows the debtor to propose a plan to repay creditors over time, usually three or five years. Chapter 13 is also available for debtors that do not qualify for Chapter 7 relief.
Who Can File for Chapter 13 Bankruptcy?
Individuals or small business owners can file for Chapter 13 bankruptcy. If you are unable to qualify for Chapter 7 relief and have a steady source of income Chapter 13 may be an option for you.
How does Chapter 13 Bankruptcy process work?
You begin your case by filing your bankruptcy petition with the court after receiving a certificate from a federally approved credit counseling center. Furthermore, a repayment plan will be drafted and attached to your petition by our office. You must be able to afford the repayment plan in order for the court to approve it.
The court will then notify the creditors that you have filed for bankruptcy and the federal court will order an automatic stay in which all collections and lawsuits will be put on hold. You will also have to attend the meeting of creditors often called the 341 meeting. The creditor’s meeting is usually the only personal appearance most filers make. Creditors may appear at the meeting regarding certain debts. However, creditors rarely attend the 341 meeting. The trustee may ask the debtor several questions regarding the paper work and the debtors finances, the meeting usually lasts a few minutes.
Unlike Chapter 7 bankruptcy, Chapter 13 will allow you to keep your property and there will be no liquidation of your personal property and you will be able to retain your assets. However, you must create a repayment plan that you submit to the court. Once submitted there will be a confirmation hearing in which a bankruptcy judge will decide whether you are able to make payments under the plan.
The Chapter 13 repayment plan will require you to pay all your disposable income to a trustee. In return, the trustee will pay your creditors for the duration of your repayment plan. After you completed the plan and completed your personal financial management counseling course, your remaining debts will be discharged.
However, you will still have to pay on debts that are not dischargeable such as certain tax debts or educational debts. Note that your repayment plan may pay from 0%-100% of your unsecured debt. Payment to unsecured creditors is determined by how much they would have received had you liquidated your assets.
Should I File for Chapter 13 Bankruptcy?
If you do not have a steady income your only choice may be to file for Chapter 7 bankruptcy. However, some people or business may have a choice between Chapter 7 and Chapter 13. Although most people decide to file for Chapter 7 because there is no repayment plan and debts are discharge much sooner. There are benefits to filing for Chapter 13 Bankruptcy. The list below are few examples of these benefits:
1· If your behind on your mortgage payments and you are at risk of losing your home, Chapter 13 Bankruptcy will allow you to pay your past due payments (arrears) through your payment plan and allow you to keep your home from being foreclosed.
2· If your house is worth less then what you owe on your 1st mortgage you may be able to reduce the amount or possibly eliminate the 2nd and 3rd mortgages all together!
3· If you have a vacation home or investment property you and the property is worth less than the 1st mortgage you may be able to reduce the amount of the 1st mortgage.
4· Can also possibly lower your car payments by repaying its replacement value in equal payments over the life of the repayment plan.
5· You are able to keep valuable personal property that you may not be able to keep in a Chapter 7 Bankruptcy.
6· You have a retail business you want to continue to operate that will have to close under Chapter 7 Bankruptcy.
7· A tax obligation, student loan, or other debt that cannot be discharged in bankruptcy, but can be paid off over time in a Chapter 13 plan.
Call The Law Office of Rami N. Nabi for a free initial consultation to determine whether filing for Chapter 13 bankruptcy is the best option for you.