Chapter 13 bankruptcy is somewhat more complicated than Chapter 7 bankruptcy. However, it is accessible to people with higher incomes or more assets that they don’t want to sell off for the benefit of creditors.
For those who have reached the point where their debt has become unmanageable but who don’t have income at or below the state median, Chapter 13 bankruptcy can provide all of the benefits of bankruptcy without the risks of losing your most valuable property or the guilt of not making any payments on your secured debts.
Who qualifies for chapter 13 bankruptcy?
There are financial limits on Chapter 13 bankruptcy filings, although they are different than the income limitations for Chapter 7 bankruptcy. Instead of limiting what income you can have or what assets you can protect, Chapter 13 rules limit what debts you can discharge.
Chapter 13 bankruptcy can only discharge up to $394,725 in unsecured debts. The person filing is also subject to a limit on their secured debts, which can total no more than $1,184,200.
What are some of the unique features of Chapter 13 proceedings?
One of the big benefits of a Chapter 13 bankruptcy will be the appointment of a trustee to oversee the proceedings. The trustee will help during the creditor meeting and negotiate the repayment plan.
The repayment plan is another important feature of a Chapter 13 filing. Those seeking a bankruptcy discharge will have to make monthly payments to the trustee for three or possibly five years before they can qualify for a discharge.
Once they do receive their discharge, a Chapter 13 bankruptcy will only stay on their credit report for an additional seven years, instead of ten years like Chapter 7 bankruptcy does.
How Chapter 13 bankruptcy could benefit you
Bankruptcy stops aggressive collection activity and also helps you repay creditors in a manner that better aligns with your current financial situation. If you qualify for Chapter 13, an experienced bankruptcy attorney can guide you through the process and help you:
- Stop foreclosure proceedings
- Protect your property
- Develop a proposal to repay creditors over the course of a three- to five-year plan
- Cure delinquent payments during that time
- Extend secured debts over the life of the bankruptcy plan
- Eliminate some judgment liens and perhaps some mortgages
- Discharge any eligible debts
Understanding what makes Chapter 13 bankruptcy different can help you determine what type of filing would be best for your personal circumstances.