If you’re struggling with more debt than you can manage and have gotten behind on your home mortgage and car payments, you may be evaluating filing for Chapter 13 bankruptcy. Some common misconceptions about bankruptcy are that you will lose your home or that the process will drag on for years. In general, this simply isn’t true. Here is some information about Chapter 13 bankruptcy and steps that you can take to accelerate the process.
Chapter 13 bankruptcy involves a reorganization of personal debts in order to help the individual manage their debt more efficiently. This type of bankruptcy gives people the opportunity to catch up on late car loan payments, mortgage payments or pay off nondischargeable financial obligations. Under Chapter 13 bankruptcy, the person filing for bankruptcy (called the “debtor”) will be asked to remit a monthly payment to a Chapter 13 trustee for a period of three to five years. The trustee sends the monthly payments to creditors who have correctly filed a claim against the debtor.
Who Can File For Chapter 13 Bankruptcy?
Filing for Chapter 13 bankruptcy is more complex than filing for Chapter 7 bankruptcy. Chapter 13 bankruptcy is generally appropriate for individuals who want to protect valuable property and who have more discretionary income that can be allocated to creditors. Individuals must meet the following criteria In order to file for Chapter 13 bankruptcy:
- Your Debts Cannot Be Over A Certain Limit. If your total burden of secured (e.g. mortgages and car loans) and unsecured (e.g. credit card bills) debts is too high, you will not be considered eligible to file for Chapter 13.
- You Are Not A Business. Chapter 13 bankruptcy is only available to individuals; however, the repayment plan can include business related debts that you have incurred.
- You Can Meet Monthly Payment Obligations. You will need to prove that you have a steady income and are able to meet the monthly payment obligations that are a part of your agreement.
What Are The Current Chapter 13 Debt Limits?
The debt limit thresholds for Chapter 13 bankruptcy change over time. It is always best to double-check with a reputable attorney to be sure you have the most current information. The Chapter 13 debt limitations are adjusted on a 3-year schedule, and the next adjustment is due to occur in 2022. According to the most recent Chapter 13 debt limits, which went into effect in April, 2019, individuals filing for Chapter 13 bankruptcy must:
- Owe less than $1,257,850 in secured debts, such as mortgages, car loans and liens.
- Owe less than $419,275 in unsecured debts, such as medical bills or credit card bills.
If a couple is filing for Chapter 13 bankruptcy jointly, then both spouses must meet these debt eligibility requirements at the time of filing. Individuals who do not qualify for either Chapter 7 or Chapter 13 bankruptcy may still be eligible to file for bankruptcy as an individual under Chapter 11. An experienced bankruptcy attorney will be able to advise and suggest possible courses of action.
How Long Does It Take To Start The Chapter 13 Bankruptcy Process?
If you meet the criteria outlined above, the process starts the minute you meet with your bankruptcy attorney. If you’re unsure about which type of bankruptcy to file for, an experienced attorney will be able to help determine which option is best for you. Your attorney will review your income, debt and other financial information and will help you complete the paperwork to officially file a bankruptcy petition. Once the petition is submitted, it can take anywhere from one to five months to complete the process. It is important to realize that you will be expected to begin making monthly payments according to the terms of your repayment plan within 30 days of filing. The repayment plan itself can take anywhere from three to five years to complete.
What’s Next If I’m Filing For Chapter 13?
Once your petition has been submitted, an automatic stay will take effect which will prevent any creditor from taking debt collection actions. Within days, the court will appoint a trustee to your case and you will receive a notice that includes information about Chapter 13, a creditors meeting date, a date for the confirmation hearing and a deadline for creditors who want to file claims. Creditors who wish to file a written objection to your repayment plan must do so prior to 25 days before your confirmation hearing.
You will be required to attend a meeting of the creditors at which the creditors or trustee may ask you questions about your finances and debts. Your trustee and attorney will advise you about documents that you’ll be required to bring, such as your tax returns. Your creditors may file an objection to your repayment plan, and you and your attorney may file written objections to your creditors claims. Once a repayment agreement is reached, you will continue to make monthly payments and your trustee will send you periodic statements that include information about which creditors have filed claims, how much each creditor has received to date and any remaining balances. Following submission of your bankruptcy petition, you will be required to take a consumer debt management education course from an approved agency.
Your Chapter 13 bankruptcy will go smoother if you take the time to gather all of the required information before you start the process. In addition, we recommend that you find a trusted bankruptcy attorney who has specific experience with Chapter 13 to help you navigate this seemingly complicated process. for a free consultation.
