Chapter 13 bankruptcy is sometimes referred to as reorganization bankruptcy. It allows a person to pay off debts over a predetermined period of time, typically three to five years. It is ideal for a wage earner with good income who is having trouble making payments on time. One of the advantages of a Chapter 13 bankruptcy is that it allows a debtor to keep certain assets, such as their home and car.
There is no income limit for filing a Chapter 13 bankruptcy. Anyone who is willing to pay down debt can file. Additionally, the source of a person’s income does not matter; it could come from wages, unemployment, Social Security or a pension. All that is required is for a person to disclose their income sources within 14 days of filing and provide proof that their income taxes are paid. Although there is no income limit, there are debt limits. A filer can have no more than $1,184,200 in secured debt and $394,725 in unsecured debt.
Prior to filing Chapter 13, a person must first complete an approved credit counseling course. Then, under the direction of a court-appointed trustee, the filer must create a repayment plan. The amount of time to complete the plan will be either three or five years, depending on the filer’s debt-to-income ratio factored against the median income within the filer’s state.
When a person has completed their repayment plan, their bankruptcy is discharged, and any remaining debts are eliminated. This is what makes a Chapter 13 bankruptcy so attractive. However, the process of preparing a bankruptcy filing can be quite intimidating. Because of this, anyone needing help might want to consider consulting a law firm with experience in Chapter 13 bankruptcy filings.
