Many people prefer filing for Chapter thirteen bankruptcies even though it requires the filer to pay back the creditors, mainly because Chapter 7 bankruptcy doesn’t offer the same options that Chapter thirteen does.
People usually file Chapter thirteen because it provides an opportunity to keep your home as long as you can pay the mortgage under a settlement plan. Chapter thirteen allows people a span of 3 to five years to resolve the debt, and simultaneously applying all their disposable income towards debt reduction.
This option allows those with enough income to pay back either all or a part of debts.
The common reasons a debtor might file a Chapter thirteen Bankruptcy case are:
- A debtor with income exceeding the Chapter 7 means test maximum and is not eligible to receive Chapter 7 discharge and wipe out qualifying debt.
- A landlord behind mortgage payment is eligible to pay the arrearages up to five years and keep the house.
- He/she can prevent collection action like wage garnishment when paying off a tax bill, overdue support, or other non-dischargeable debt.
- The debtor can protect his/her nonexempt property that might get sold in Chapter 7.
Though with Chapter thirteen provides you with the relief of keeping your home, you are required to spend years living under court-appointed trustee’s supervision and face the distribution of your payments.
This is one of those cases where speaking directly to a bankruptcy attorney before you consider filing Chapter thirteen is a wise thing to do. By doing so, you’ll also find out if you qualify.
Check out what this bankruptcy lawyer has to say about chapter 7 for a better overview of the differences between the two options.
When do you be worth for Chapter thirteen?
To select for Chapter thirteen, you will need to display the downfall court that you will have sufficient income left after subtraction of fixed permitted expenses and essential payment on secure loan like a mortgage or car loan to meet the repayment obedience. Your plan have to repay fixed loan in full, or it will not be approved by the judge, however, allowing you to move forward.
A debtor may use the earning to fund the Chapter thirteen plan from sources such as earn from business, regular wages or salary, pension payments, wages from seasonal work, unemployment benefits, disability benefits, public benefits, child shelter or maintenance received, royalties or profit from selling properties if it is a part of primary business.
When do you not be worth for Chapter thirteen?
Considering the aspects of Chapter thirteen, not all debtors selected for Chapter thirteen. There are few cases where you do not select for Chapter thirteen bankruptcies. A debtor doesn’t enable for Chapter thirteen if his/her debts are too high if their secured or unsecured debt exceeds the limit. A secured debt is where the debtor stands to lose the property if the payment isn’t made to the bondholder and home loans, car loans make the most usual example of such debts.
On the other hand, unsecured debt provides the creditors with no rights to claim a particular property under the circumstances of failure in repayment. The credit card debts, legal bills, medical bills, and utility bills are examples of unsecured debts.
A business owner can’t file for Chapter thirteen in the name the same as the business they own. They are diluted towards Chapter 11 bankruptcy. However, when you need help to reorganize the debts, Chapter thirteen will effectively help to restructure a sole proprietor business, which means a debtor can file for Chapter thirteen bankruptcy as an individual business owner.
Most importantly, the stockbrokers and commodity brokers aren’t eligible to file a Chapter thirteen Bankruptcy, in the case of discharging the debts of non-business.
How do you file for Chapter thirteen bankruptcy?
Record for Chapter thirteen, the debtor will need to disclose all the aspects of financial conditions such as income, creditors and submit the proof of filed federal and nation and income tax return for the four years before the bankruptcy ending time. The case starts when the debtor files the form with all the necessary paraphernalia also the registering fee and proof of completion of counseling class.
The court can postpone the proceedings if the debtor needs time to find recent on the filings, and if the debtor fails to produce those departure or copy of four tax years, then the Chapter thirteen will be closed.