Frequently asked questions
Most frequent questions and answers
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is a type of bankruptcy that allows individuals with a regular income to reorganize their debt and develop a repayment plan to pay off their creditors over a period of three to five years. This type of bankruptcy is often referred to as a “wage earner’s plan” as it is designed for individuals who have a steady income but are struggling to keep up with their debts.
What are the benefits of filing for Chapter 13 bankruptcy?
Repayment Plan: Chapter 13 bankruptcy allows individuals with a regular income to develop a repayment plan to pay off their debts over a period of three to five years. This can provide individuals with the breathing room they need to get back on track and avoid the stress and uncertainty of collection efforts by their creditors.
Protection of Assets: Unlike Chapter 7 bankruptcy, which may require individuals to liquidate assets to pay off debts, Chapter 13 bankruptcy allows individuals to keep their assets while they work to repay their debts. This can be particularly beneficial for individuals who have significant equity in their homes or other valuable assets.
How do I qualify for Chapter 13 bankruptcy?
To qualify for Chapter 13 bankruptcy, you must meet certain requirements set forth by the bankruptcy code. These requirements include:
Regular income: You must have a regular income that is sufficient to cover your necessary living expenses as well as your proposed repayment plan.
Secured debt limit: Your secured debts (such as mortgages and car loans) must be below a certain threshold set by the bankruptcy code.
Unsecured debt limit: Your unsecured debts (such as credit card debt and medical bills) must be below a certain threshold set by the bankruptcy code.
No prior discharges: You must not have received a discharge in a Chapter 7, 11, or 12 bankruptcy case filed within the past four years, or a Chapter 13 bankruptcy case filed within the past two years.
Completed credit counseling: You must have completed a credit counseling course from an approved agency within 180 days prior to filing for bankruptcy.
It is important to work with a knowledgeable bankruptcy attorney to determine if you meet the requirements for Chapter 13 bankruptcy and to understand the process and implications of filing for bankruptcy.
What are the requirements for Chapter 13 bankruptcy?
To file for Chapter 13 bankruptcy, an individual must meet certain requirements:
Regular income: The debtor must have a regular income, which can be from employment, self-employment, or another source.
Debt limit: The debtor’s unsecured debts must be less than $419,275, and their secured debts must be less than $1,257,850. These limits are adjusted periodically to reflect changes in the consumer price index.
Filing history: The debtor cannot have had a prior Chapter 13 bankruptcy case dismissed within the past 180 days, nor can they have had a prior Chapter 7, 11, or 12 bankruptcy case dismissed within the past 180 days due to the debtor’s willful failure to appear before the court or comply with orders of the court.
Credit counseling: The debtor must complete credit counseling with an approved credit counseling agency within 180 days before filing for bankruptcy.
Repayment plan: The debtor must develop and submit a repayment plan to the court for approval. The repayment plan must provide for full or partial repayment of the debtor’s debts over a period of three to five years.
It’s important to note that Chapter 13 bankruptcy is a complex legal process, and it’s crucial to work with a knowledgeable bankruptcy attorney to navigate the process and ensure that all requirements are met.
How long does Chapter 13 bankruptcy take?
The length of a Chapter 13 bankruptcy case typically lasts between three to five years, depending on the terms of the repayment plan. During this time, the debtor is required to make monthly payments to a trustee who then distributes the funds to creditors in accordance with the terms of the plan.
The length of the repayment plan will depend on several factors, including the amount of debt owed, the debtor’s income, and the debtor’s expenses. In some cases, a debtor may be able to complete the repayment plan ahead of schedule if they are able to pay off all of their debts sooner than anticipated.
It is important to note that the length of the repayment plan is determined by the court, and any changes to the plan must be approved by the court. Additionally, the debtor must continue to make all required payments on time throughout the duration of the repayment plan in order to successfully complete the Chapter 13 bankruptcy process.
How much does it cost to file for Chapter 13 bankruptcy?
The cost to file for Chapter 13 bankruptcy varies depending on several factors, including the jurisdiction where you live, the complexity of your case, and the fees charged by your bankruptcy attorney.
As of September 2021, the filing fee for Chapter 13 bankruptcy in the United States is $335. However, this fee may be waived or paid in installments in certain circumstances, such as if you cannot afford to pay the full fee upfront.
In addition to the filing fee, you will also be required to pay fees for credit counseling and debtor education courses, which are typically around $50-$100 each.
You will also need to hire a bankruptcy attorney to represent you in your Chapter 13 case. Attorney fees can vary widely depending on the complexity of your case, the experience of your attorney, and other factors. In general, you can expect to pay several thousand dollars in attorney fees for a Chapter 13 case.
Overall, the cost of filing for Chapter 13 bankruptcy can be significant, but it is important to keep in mind that the benefits of Chapter 13 can outweigh the costs in the long run. It is important to discuss your options with a bankruptcy attorney who can help you understand the costs and benefits of Chapter 13 bankruptcy in your particular situation.
What are the consequences of Chapter 13 bankruptcy?
What should I do if I'm considering filing for Chapter 13 bankruptcy?
If you are considering filing for Chapter 13 bankruptcy, it is important to first consult with a qualified bankruptcy attorney who can help you understand your options and guide you through the process. Here are some steps you should take:
Find a qualified bankruptcy attorney: Look for an attorney who specializes in bankruptcy law and has experience handling Chapter 13 cases. A good attorney can help you understand your options, evaluate your financial situation, and guide you through the bankruptcy process.
Gather your financial documents: You will need to provide your attorney with a complete picture of your financial situation, including income, expenses, assets, and debts. Be prepared to provide documentation such as tax returns, bank statements, pay stubs, and bills.
Evaluate your debt: Review all of your debts and determine which ones can be included in your Chapter 13 repayment plan. Some debts, such as certain taxes, child support, and student loans, may not be dischargeable in bankruptcy.
Develop a repayment plan: Work with your attorney to develop a repayment plan that is feasible and meets your needs. Your plan will need to be approved by the bankruptcy court, so it is important to ensure that it is well-crafted and realistic.
Attend a credit counseling course: Before filing for bankruptcy, you will need to attend a credit counseling course from a court-approved provider. This course is designed to help you understand your options and make informed financial decisions.
Filing for Chapter 13 bankruptcy can be a complex and challenging process, but with the help of an experienced bankruptcy attorney, you can navigate the process and achieve financial stability.