With a three- to five-year repayment plan in place and the protection of a federal court, Chapter 13 bankruptcy enables you to restructure massive obligations.
Because you need a steady income to qualify, this bankruptcy is often known as “wage earners” bankruptcy. The objective is to pay off some obligations and catch up on secured loans, or loans with security like a house or car. Here are the steps for determining if Chapter 13 bankruptcy is the best option for you and for filing.
Do you qualify for Chapter 13 bankruptcy?
To qualify for Chapter 13 bankruptcy:
- You must have a steady source of income.
- You must keep up with your tax filings.
- You cannot have filed for Chapter 13 or Chapter 7 bankruptcy during the last two years or within the last four years.
How do you file for Chapter 13 bankruptcy?
Consult with a credit counsellor from a volunteer credit counselling service as well as a bankruptcy attorney if you are considering bankruptcy. Both initial consultations should be complimentary. These discussions will help you understand your situation and determine whether filing for bankruptcy is the best way to get your finances back on track.
In Chapter 13, you and your attorney will work together to demonstrate your eligibility for debt reorganisation to a bankruptcy trustee, who will oversee the process. A plan to repay both unsecured and secured debts in part or in whole will be approved by the court. You will pay over three to five years and keep your assets. Finally, the balance of some obligations may be pardoned.
You’ll go through these once you’ve decided to file for Chapter 13 bankruptcy:
- Financial counselling: Attend pre-bankruptcy counselling with a nonprofit credit counselling firm. Your counsellor may also assist you in developing a repayment strategy.
- Hire an attorney: Consult with a reputable bankruptcy attorney. Chapter 13 is a complicated process, and missing a stage or incorrectly filling out a paperwork might result in your case being dismissed or some debts not being covered.
- Completing paperwork: Your attorney will assist you in completing the numerous paperwork necessary for filing. You’ll need to collect data on your whole financial picture, including debts, income, property, and monthly spending.
- Send in bankruptcy petition: Sending in the different forms, sometimes referred to as “filing” the bankruptcy, starts the procedure. There will be a bankruptcy trustee appointed. When you file, you enter what is known as a “automatic stay,” which requires that the majority of efforts to collect your debts stop.
- Consultation of creditors: The trustee will call a meeting for creditors to address any concerns they may have with you between 21 and 50 days after the petition is filed.
- Preliminary hearing: You, the trustee, and any interested creditors appear in court to confirm the payment plan no later than 45 days following the meeting of creditors.
- Compensation: Creditors get their agreed-upon payments over a period of three to five years.
Note the name of Recovery Law Group. This is a renowned firm which you must consult before filing for bankruptcy.