Chapter 13 Bankruptcy
What is Chapter 13 Bankruptcy?
When debt becomes overwhelming, many people seek relief through bankruptcy. Under a Chapter 13 Bankruptcy, the debtors property is not sold, like in cases of Chapter 7 filing. Instead, the filer complies with a repayment plan to creditors over the course of 3 - 5 years in exchange for debt relief.
Under this repayment plan, your debts are reorganized, your assets are not liquidated, and creditors are forbidden to continue their collection efforts, allowing you relief and the chance to prioritize and pay your debts.
Chapter 13 Eligibility - Who Is It For?
There are many requirements to filing under this type of relief. Filing bankruptcy with Chapter 13 are for those who earn a significant income and want to protect valuable property and assets, like a home or car.
You can be eligible for Chapter 13 bankruptcy if you meet the following needs:
- No Exceeding Debt - Debts by the filer, whether secured or unsecured, cannot exceed certain amounts. If your unsecured debt burden exceeds $394,725, or your secured debt burden exceeds $1,184,200, you will be ineligible for this type of bankruptcy.
- Regular Income - When you file your Chapter 13 case, you have to be able to prove to the court that you can both meet your monthly household needs, while also being able to maintain a repayment plan. If your income is not steady, or is too low, the court won’t approve your case.
- Previous Bankruptcy Filings - You will not be eligible if you have filed for Chapter 13 in the past 2 years, Chapter 7 in the past 4 years, or had filed a bankruptcy petition in the last 180 days that was dismissed.
- Personal, Not Business Use - This chapter is only available to individual use, and not to companies. However, business-related debts that the individual is personally responsible for can be included in the plan.
The Chapter 13 Bankruptcy Process
Filers will be able to propose a repayment plan to the creditors and the court, detailing all of your debts and how you plan to repay them over a period of time. The court will then hear any objections, and then confirm the plan on the basis that it is feasible, compliant and proposed in good faith.
You will then make a monthly payment to a court-appointed trustee, who distributes your money to your creditors. Debts will be wiped out only when the 3-5 year repayment plan has been completed.
In order to be considered for a Chapter 13 filing, you must receive mandatory pre-filing credit counseling through a nonprofit credit counseling agency. This credit proves that you have sufficient income to meet the filing requirements. After filing, you also will have to take a second debtor education course, to be completed by the end of your payment plan.
If at some point during the course of your plan your financial situation changes and you are unable to make the payments, you may be able to appeal to the court and modify the amount being paid to your unsecured creditors. If this isn’t feasible, you may be able to switch to a Chapter 7 bankruptcy case or dismiss your Chapter 13 case. If you are falling behind in payments, speak to a lawyer on the best option moving forward.
A Chapter 13 case is resolved when the repayment plan has been completed, the budget counseling course has been completed, and all obligations of child support or alimony are current. All of your debt will then be wiped free, except for any applicable mortgages or student loans.
When To File For A Chapter 13 Bankruptcy
When you are considering whether to file for bankruptcy, meet with a bankruptcy attorney. They will be able to provide guidance and a plan of action moving forward. You and your attorney will be able to work to prove your eligibility and create a court approved plan to repay debts.
Throughout your case, you must complete all of the following steps:
- Pre-filing credit counseling through a nonprofit credit counseling agency
- Fill out the various forms required to file, including information on debts, income, property and monthly expenses
- Submit a bankruptcy petition to formally begin the process
- Submit your proposed payment plan
- Meeting of creditors to discuss any issues
- Confirmation hearing to confirm or object to the payment plan
- Payment over the course 3-5 years
- Before completion of your Chapter 13 bankruptcy, you must complete a debtor education course from a nonprofit credit counseling agency
Although it is possible to represent yourself in a Chapter 13 case filing, it is very difficult to achieve and most courts encourage the presence and guidance of a professional counsel. The bankruptcy attorneys at Ivey McClellan can work through your case alongside you. If you want to learn more about whether a Chapter 13 Bankruptcy is right for you, make an appointment today!
100 South Elm Street Suite 500
Greensboro, NC 27401
551 Monroe Street
Eden, NC 27288
Phone: (336) 623-4600