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Chapter 13 Bankruptcy Information
A Chapter 13 bankruptcy is also called a re-organization bankruptcy, because it gives debtors the chance to pay back their debt over a period of time. This is much different from a chapter 7 bankruptcy, which liquidates the assets to pay off the debts and eliminates anything left over. A chapter 13 bankruptcy is what you would use when you have a steady income and you want to keep your assets.
Using a chapter 13 bankruptcy may be a great form of bankruptcy for someone who would rather pay back their debts, rather than having them eliminated with a chapter 7 bankruptcy.
A chapter 13 bankruptcy is often used in foreclosure cases. Both a Chapter 7 and a Chapter 13 can be used to fight foreclosure, but a Chapter 13 establishes a more long term and complete plan to stop foreclosure, where a Chapter 7 is used more as a tool to buy additional time. Although a Chapter 7 will stop a foreclosure dead in it's tracks.
Chapter 13 bankruptcy works by allowing filers to catch up on their debts with the help of a three to five year repayment plan. This means that filers must make regular monthly payments for several years. Should a filer miss a payment, he or she risks losing the protection of the bankruptcy automatic stay.
In the event you will not be able to make a payment under the chapter 13 repayment plan, you could request a Chapter 13 Forbearance or an extension of the repayment plan. If your situation has changed drastically and you will not be able to continue with the payments at all, you may ask the court to convert your Chapter 13 bankruptcy to a Chapter 7 Bankruptcy.
With a Chapter 13 Bankruptcy, they don't have a specific “means test” that you must pass, like with a Chapter 7 bankruptcy, but there is a certain set of circumstances that you'll have to have to qualify.
The first of which, is a regular and steady income. With a Chapter 13, you'll be required to make monthly payments according to a three to five year repayment plan. In most cases the court will establish a repayment plan that will pay off all the debt and still allow a small amount of disposable income. But you will need to get used to living on a budget and managing your finances more responsibly.
"A chapter 13 Bankruptcy can help save your home from a foreclosure and give you and your family the time needed to recover from a financial hardship." This means you should have a dependable source of income so you don’t risk missing a payment and losing the court’s protection. You'll also need disposable income, because you'll need to make the bankruptcy payment and still be able to cover all your regular monthly living expenses, such as food, gas, clothing, and medical expenses.
With a chapter 13 bankruptcy, there are limits placed on the amount of secured and unsecured debt you are allowed to have. These numbers change from time to time, so it's important to speak with an attorney before moving forward to verify that you will qualify.
Filing for bankruptcy doesn't have to be scary, just make sure it's your best option before moving forward.
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
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