If you have debt problems and are looking for a way to resolve them, then Chapter 13 bankruptcy might be an option to consider. In this article, we will tell you more about Chapter 13 bankruptcy and what it can do to help you overcome your financial problems.
Understanding Chapter 13 bankruptcy
Chapter 13 refers to a bankruptcy case in the United States when debtors reorganize their finances under the court’s supervision and consent. As soon as the bankruptcy case is filed, collections are put on hold. That means that debt collectors and creditors are required to stop calling, visiting, or texting you.
This repayment plan offers various forms of relief to individuals and married couples. Everyone who works and earns enough money to pay off their debts may apply for Chapter 13, even if they are self-employed or running an unincorporated business.
The difference between Chapter 13 and Chapter 7 bankruptcy
Bankruptcy can be valuable not only for people but for businesses struggling with overwhelming debt. However, it is essential to understand the differences between Chapter 7 and Chapter 13 bankruptcy and choose the one that best suits your needs and objectives in terms of money.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is intended for people with excessive debts and insufficient income. Unsecured debts such as credit cards and medical expenses can be discharged under this sort of bankruptcy without repayment. The filer’s assets are evaluated, and those not covered by bankruptcy exemptions may be sold to repay some creditors. However, most people keep their assets since they are covered by exemptions. Chapter 7 bankruptcy is ideal for individuals with little or no property who wish to discharge their debts quickly.
On the other hand, Chapter 13 bankruptcy, or reorganization bankruptcy, is designed for individuals with a stable income who cannot manage their debts. This type of bankruptcy allows filers to reorganize their debts and repay a portion of them over time while protecting their assets from seizure.
This chapter is ideal for individuals with a stable income who wish to keep their assets and repay their debts over time. Filers are required to provide a repayment plan outlining their three- to five-year payback schedule for creditors. They must pay their debts in full or at least the value of the non-exempt property. Moreover, non-dischargeable debts, such as tax obligations and child support, cannot be eliminated but can be reorganized.
In conclusion, the primary difference between Chapter 7 and Chapter 13 bankruptcy is the debt relief method. Chapter 7 offers a quick and complete discharge of unsecured debts, while Chapter 13 offers a reorganization of debts with repayment over three to five years. Filers must choose the type of bankruptcy that best meets their financial needs and goals.
How to file for Chapter 13 bankruptcy?
There are a couple of steps to follow when filing for Chapter 13 bankruptcy.
– Credit counseling: You must complete pre-filing bankruptcy counseling through a nonprofit credit counseling agency. Your counselor may help you draft a repayment plan.
– Get an attorney: Hire a qualified bankruptcy attorney to guide you through the complex Chapter 13 process.
– Fill out paperwork: You and your attorney must gather information on your debts, income, property, and monthly expenses to complete the required forms.
– Submit bankruptcy petition: Submitting the forms completes the process and triggers an “automatic stay” that prohibits most attempts to collect on your debts.
– Submit payment plan: Within 14 days of filing, you must submit a proposed payment plan and start making payments within 30 days, even if it hasn’t been approved yet.
– Meet with creditors: The trustee will host a meeting between 21 and 50 days after filing, during which creditors can raise any issues they have.
– Confirmation hearing: The trustee and the creditors who wish to attend should meet in court no later than 45 days after the meeting of creditors to confirm the payment plan.
Do state laws change the procedure significantly?
The truth is that state laws can impact the bankruptcy process, including eligibility requirements, exemptions, and the specific procedures and timelines involved. It’s important to consult with a qualified bankruptcy attorney familiar with your state’s laws and regulations to ensure you understand how they may impact your case.