Is Chapter 13 Right for You?

Chapter 13 bankruptcy allows debtors that file their petition with the court to submit a plan of how they will repay their debt. This form of bankruptcy is referred to as a wage earners plan by the United States government. The repayment plan submitted by the debtor must have the debt repaid within three to five years of the plan’s start. No plan submitted by a debtor can take longer than five years to pay back the debt. During the repayment process by the debtor, his or her creditors must stop all of their collection efforts such as phone calls or letters to the debtor.

Determine Chapter 13 Eligibility

Eligible persons for Chapter 13 bankruptcy include individuals who are self-employed or who operate an unincorporated business as long as their unsecured debts total less than $336,900 and their secured debts total less than $1,010,650. Corporations and partnerships are not eligible to file for Chapter 13 bankruptcy. If a debtor failed to appear in court within the previous 180 days for another bankruptcy hearing then he or she cannot file for Chapter 13 bankruptcy. As with Chapter 7 bankruptcy, debtors wishing to file for Chapter 13 bankruptcy must receive counseling from an approved credit-counseling agency 180 days prior to filing the bankruptcy petition. In emergencies, the United States trustee can make exceptions to the rules above for eligibility.

Using Chapter 13 to Stop a Foreclosure

By far, the most common reason debtors choose to declare chapter 13 bankruptcy is to save a home that would otherwise be foreclosed upon. The repayment plan and new laws associated with chapter 13 bankruptcy allows home owners to stop foreclosure proceedings, and create a plan that will allow them to get back on track to paying off their home loan. The laws are rather complicated, so anyone wanting to do this should have a bankruptcy lawyer representing them.

Consult with a Bankruptcy Lawyer

Before making any decisions about filing for Chapter 13 bankruptcy debtors should consult with a bankruptcy lawyer to discuss their case. A lawyer will be able to answer all questions a debtor might have regarding the process as well as represent the debtor during their court appearances as well as their meeting with creditors. A lawyer can also provide a list of alternative options for the debtor to choose from instead of filing for Chapter 13 bankruptcy.