You need to file for bankruptcy to get a fresh start with your finances. However, you don’t want to give up assets and property to pay off your debts as you do in a Chapter 7 bankruptcy.
Instead, you just need for restructure your debt in to a workable repayment plan. A Chapter 13 bankruptcy can be a good choice – especially if you’re a homeowner.
Are you eligible for Chapter 13?
Chapter 13 bankruptcy is sometimes known as a “wage-earner’s plan,” because to qualify you need to have a regular income. Let’s look at some of the other requirements for eligibility:
- You must have no more than $394,725 in unsecured debt. Unsecured debs include things like personal loans and credit cards.
- You must have no more than $1,184,200 in secured debt. This is debt “secured” by an asset like a home, car or boat.
- You must be current on filing your income taxes and paying any taxes owed.
- You can’t have had a bankruptcy dismissed within the past six months for failure to comply or appear in court.
Note that you can’t have a Chapter 13 bankruptcy discharged if an earlier Chapter 13 was discharged within the previous two years or a Chapter 7, 11 or 12 bankruptcy was discharged within the past four years. Therefore, it’s important to discuss the timing of your filing with your attorney if you have already been through bankruptcy.
What else should you know about Chapter 13?
Chapter 13 repayment plans are either three or five years. Your median income will determine which you will follow. If your income is below the median for the state, it will be three years. If it’s above the median, it will be five years.
There are a number of benefits to a Chapter 13 bankruptcy as opposed to Chapter 7. In addition to being able to keep your home and other valuable assets, the bankruptcy comes off your credit report sooner (seven years as opposed to 10). However, you need to keep up with the required payments. If circumstances change, you may be able to modify the plan. However, if you miss payments, you could end up having to give up the assets you wanted to protect.
Bankruptcy can be complex, confusing and sometimes a little frightening. You need to understand it and be aware of what’s expected of you to complete it successfully. An experienced attorney can provide valuable information and guidance as you decide which type to file to do and as you go through the process.