If you are unable to pay your bills or are in danger of foreclosure, filing for Chapter 13 bankruptcy protection might help you. This is the second-most popular type of consumer bankruptcy and allows you to restructure your debts. With more than 40 years of combined experience, the attorneys at the Law Offices of Craig L. Cook have the knowledge that you need to successfully file for bankruptcy.
What Is Chapter 13 Bankruptcy?
Consumers have the option of filing for bankruptcy protection under several Bankruptcy Code chapters. The two most popular types of bankruptcy are Chapter 7 and Chapter 13. Bankruptcy under Chapter 7 is called a liquidation bankruptcy because you might have some of your assets liquidated to pay your debts. Once your debts are discharged under Chapter 7, you will no longer be responsible for repaying them.
Chapter 13 bankruptcy is known as a debt reorganization bankruptcy. Under this chapter, you are able to keep more of your possessions. You enter into a plan to repay portions of your debts during a period lasting from three to five years. Most of your remaining unsecured debt balances will be discharged when you complete your plan.
Benefits of Filing for Protection Under Chapter 13
Filing for protection through Chapter 13 offers several advantages for people who are eligible.
First, if your home is in foreclosure, a Chapter 13 petition will stop the foreclosure process. You will then have between three and five years to catch up and repay the amount that you are behind while continuing with your regular mortgage payments. If you successfully complete your repayment plan, you will then be able to continue with your mortgage.
Bankruptcy under Chapter 13 may also allow you to keep more of your property. For example, if you have non-exempt property that would be liquidated to repay your debts in a Chapter 7 proceeding, filing under Chapter 13 might allow you to keep it.
Filing to restructure your debts under Chapter 13 might also help you to repay your debts more quickly. The bankruptcy court establishes interest rates for Chapter 13 plans that are often substantially lower than the rates that you pay under your contracts. Penalties and interest that have accumulated on certain types of debts may also be dischargeable, helping you save substantial sums.
Eligibility for Chapter 13 Bankruptcy
In order to file for protection under Chapter 13, you must meet the eligibility requirements.
First, you must be filing for consumer bankruptcy protection; business entities may not file for protection under Chapter 13. You also must not have had a prior bankruptcy case dismissed within the previous six months if the dismissal happened because of your willful violation of the court’s order, you did not show for a scheduled hearing, or you moved for a dismissal when a creditor asked for the automatic stay to be lifted.
Chapter 13 also has debt limits. As of 2018, the limit for unsecured debts is $394,725. This means that your unsecured debts may not exceed that amount. Similarly, there is a limit of $1,184,200 for your secured debts such as your mortgage, automobile loans, and other debts that are secured by your property.
You must have a source of regular income to pay for your living expenses and to make your payments to the bankruptcy trustee during your repayment plan. In addition, you cannot be time-barred by a previously filed bankruptcy, and your plan must include the repayment of certain types of debts in full. Your attorney will work with you to create a repayment plan that is likely to be accepted by the bankruptcy court. Finally, you must have filed your state and federal income tax returns for the last four years before you can file for bankruptcy.
Types of Debts Under Chapter 13
Your proposed repayment plan must include plans to repay certain debts in full, including the following types:
- Priority debts such as child support, alimony, nondischargeable taxes, and criminal restitution must be paid in full during repayment.
- Secured debts that will continue after your repayment plan such as your mortgage must be kept current during repayment.
- Other secured debts that will not last past your repayment plan must be repaid in full during your plan.
Your attorney will help you devise a repayment plan that will work for your particular debts if you are eligible for protection under Chapter 13.
Contact the Law Offices of Craig L. Cook Today
To learn more about which chapter of bankruptcy is the most appropriate for you, contact the experienced legal team at the Law Offices of Craig L. Cook. Call us at 479-783-8000 or fill out the online contact form to schedule your free consultation today.