Chapter 13 Bankruptcy Overview: Part 2
Welcome back to our discussion on Chapter 13 bankruptcy. In part one, our bankruptcy attorney provided an overview of what Chapter 13 bankruptcy is, some of the benefits of filing, and the filing process. In this article, we will delve deeper into Chapter 13 bankruptcy.
Who Is Eligible for Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is designed for individuals with regular income who have unsecured debts, such as credit card debt or medical bills, and secured debts, like a mortgage or car loan. There are specific eligibility requirements that have to be met in order to file for Chapter 13 bankruptcy. These requirements include:
- You must have a regular income. This can include employment, self-employment, or other sources such as disability benefits or retirement income.
- Your unsecured debts must be less than $419,275, and your secured debts must be less than $1,257,850.
- You must not have filed for Chapter 13 bankruptcy within the past two years or Chapter 7 bankruptcy within the past four years.
- You must complete credit counseling from an approved agency within 180 days before you file for bankruptcy.
Can You Afford the Repayment Plan for Chapter 13?
One of the key components of Chapter 13 bankruptcy is the repayment plan. Under this plan, you will make monthly payments to a bankruptcy trustee for three to five years. The trustee will then distribute these payments to your creditors. The amount of your monthly payment will be based on your income, expenses, and the amount of your debts.
Before filing for Chapter 13 bankruptcy, it is essential to consider whether you can afford the repayment plan. You will need to have enough income to cover your living expenses and the monthly payment to the trustee. If you cannot make the payments, your case may be dismissed, and you may lose the protections provided by bankruptcy.
How Much Will You Pay in a Chapter 13 Repayment Plan?
The amount you will pay in a Chapter 13 repayment plan will depend on several factors, including:
- The amount of your debts. The more debt you currently have, the higher your monthly payment will be.
- The length of your repayment plan. If you choose a three-year plan, your monthly payments will be higher than a five-year plan.
It is worth noting that not all debts are treated equally in a Chapter 13 repayment plan. Some debts, such as taxes and child support, must be paid in full, while others, such as credit card debt, may only require a specific percentage to be paid.
What Happens If You Can’t Pay Your Chapter 13 Plan?
If you cannot make your Chapter 13 plan payments, several options are available to you. You may be able to modify your plan to lower your monthly payment, or you may be able to request a hardship discharge. This is only available in limited circumstances, such as if you are unable to continue making payments due to a permanent disability.
If you are unable to modify your plan or obtain a hardship discharge, your case may be dismissed. If this happens, you will lose the protections provided by bankruptcy, and your creditors may resume collection efforts.
Chapter 13 Bankruptcy May Be the Debt Solution You Need
Chapter 13 bankruptcy can be a powerful tool for individuals struggling with debt. However, you must carefully consider your financial situation and whether you can afford the repayment plan before filing for bankruptcy. If you are considering Chapter 13 bankruptcy, it is recommended that you consult with a bankruptcy attorney to discuss your options and ensure that your rights are protected throughout the process.
Angela R. Owens is a proficient bankruptcy attorney offering top-notch legal assistance to clients in Plano, Allen, Frisco, Dallas, and surrounding regions. Book a consultation with our bankruptcy attorney today!
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