Chapter 13 is a debt adjustment or debt reorganization bankruptcy and is intended for individuals who have sufficient income to pay their debt over time. It is sometimes referred to as a wage earner’s plan and includes creation of a plan to repay all or part of you debt. Repayment plans cover a 3 or 5 year period dependent on whether your income is above or below theNorth Carolina state median. During the time of the repayment plan, creditors are barred from starting or continuing collection efforts against you.
Dependent on your circumstances there are distinct advantages to Chapter 13 over Chapter 7’s liquidation of property. Most significantly, Chapter 13 offers the opportunity to save your home from foreclosure. Under Chapter 13, foreclosure proceedings are halted and a plan is created to cure the delinquent mortgage debt the period of your repayment plan. Mortgage payments must be made in a timely fashion during the Chapter 13 plan.
Another advantage of chapter 13 debt reorganization is that it allows rescheduling of most secured debt to be extended over the life of the Chapter 13 repayment plan, potentially allowing for lower monthly payments. Chapter 13 gives special consideration to third party co-signers, and can possibly protect them from liability incurred through your bankruptcy. In many regards, Chapter 13 is similar to consolidation loan. Payments get made to a trustee, who distributes payments to creditors, providing you protection from contact or harassment from creditors during the pendency of your repayment plan.
There are some limitations to eligibility for Chapter 13 debt reorganization. Your secured and unsecured debts most not surpass certain thresholds, and, like Chapter 7 Liquidation, you cannot have had a Chapter 13 petition dismissed during the six month preceding period, and you must receive credit counseling during the same timeframe before filing.
Like Chapter 7, Chapter 13 begins with the filing of a petition with the United States Bankruptcy Court where you live or your business’s principal office is located. Other documentation has to be included with the petition for bankruptcy, including schedules of:
Additional documentation must be filed with the Chapter 13 trustee, including:
The court charges a $235 filing fee and $46 miscellaneous administrative fee, which can be paid in installments if necessary and upon appropriate application.
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household’s financial position.
The process of Chapter 13 bankruptcy debt reorganization analyzes you debt, your expendable income and creates a plan for debt repayment through the court trustee that is limited to a specific time period. Upon successful completion of the requirements of your debt reorganization plan, remaining balances are discharged and you are again in good standing on all your payments with new expendable income. And because you are reorganizing your debt structure, and not liquidating it, you may be able to stop foreclosure and save your family home, among other assets.
Call Rod Kight and find out how Chapter 13 Debt Consolidation can be an effective tool to restoring your financial health.