signing womanHave you recently found yourself struggling to repay a pile of credit card debt while also trying to pay for your home and car? Filing for Chapter 13 bankruptcy may be the answer to your credit collection problems. Known as the “wage earner’s plan”, Chapter 13 bankruptcy is a voluntary reorganization of debts for individuals. Hassling phone calls from creditors can be held off with a structured repayment plan that shows how a debtor will use their income to pay off debts over time. Chapter 13 can give you some breathing room while you consolidate your debt and will not require you to fork over any property.

Limitations

Access to Chapter 13 bankruptcy is not guaranteed and it is important to speak to an experienced Chapter 13 bankruptcy lawyer to be sure this is the right plan for your circumstances. Limitations to filing under Chapter 13 include a cap on the amount debt owed. Under the current rules, secured debts cannot exceed $1,010,650. Unsecured debt, when a creditor does not have the right to take a specific item of property because it is not repaid, cannot exceed $336,900. Additionally, a debtor’s income must be high enough to make all the payments under the proposed reorganization plan. That income must also be considered steady and regular to ensure that the debtor can make payments according to the structured repayment plan. Some items of debt are also ineligible for discharge under Chapter 13 bankruptcy including, but not limited to, alimony, child support, and student loans. Following confirmation, a debtor will be barred from obtaining new credit without the bankruptcy court’s permission. This rule will stay in effect until your case has been discharged.

Consolidation

Unlike Chapter 7 bankruptcy that requires the liquidation of assets, individuals seeking relief with Chapter 13 will be provided with a plan for reorganization. This process is often referred to as debt consolidation and is seen as a form of debt refinancing that entails taking out one loan to pay off many others. Planning repayment paperwork will describe how much you will pay creditors to reduce debt in minute detail. Before filing, debtors are required to receive credit counseling from a United States Trustee’s office-approved agency. Debtors must provide case trustee with their tax return for the most recent year and all subsequent returns filed during repayment.

Repayment

Repayment plans are usually scheduled for three to five years depending on the debtor’s income and the amount of debt to be paid. These payments must begin within 30 days after the confirmation hearing when the case is accepted by the courts. Priority debts are considered the most important and will be paid first and foremost over other debts. Priority items can include items such as taxes or child support payments. As long as a debtor is current on all non-dischargeable debts, and has completed the repayment plan and a budget counseling course, the bankruptcy court will rule for a discharge of the debt.

Finding yourself unable to pay the many and varied forms of debt does not mean losing your property. Unlike Chapter 7 bankruptcy, Chapter 13 will provide a plan for reorganization instead of requiring debtors to liquidate their property. This can be a big help to those seeking the opportunity to save their homes or other high-value assets.