Although there are a range of credit and financial implications, Chapter 13 bankruptcy is a viable option for those looking to keep property if they can maintain a certain level of income to support a repayment plan.
Unlike other bankruptcy options, Chapter 13 allows you to use this estimated existing or projected income to make payments on your debts over the next 3-5 years. The goal is to resolve as many of your debts as possible at a lower overall repayment rate compared to the liquidating process that Chapter 7 offers.
Eligibility Requirements for Chapter 13 Bankruptcy
In order to restructure debt and come up with a repayment plan, you’ll need to meet a strict set of requirements:
- Earning regular income with current tax returns
- Unsecured debts (like credit cards and personal loans) can’t exceed $394,275 and secured debt (non-personal loans, mortgages) can’t exceed $1,184,200
- If you’ve had a bankruptcy dismissed within 180 days for a failure to appear or comply, you may not qualify
- You do not have a Chapter 13 discharge within the past two years or a Chapter 7, 11, or 12 within the past four years
- You will also need to complete a credit counseling course before the filing can proceed
Filing for Chapter 13 Bankruptcy
After filling out initial identifying information, you’ll have to declare all of the property you own on a “Schedule A/B, Property” form, including:
- Real estate
- All vehicles you own (of any kind)
- Personal and household items (furnishings, electronics, collectibles, sporting, and hobby equipment, firearms, clothing, jewelry, pets)
- Financial assets including bank accounts, retirement accounts, other investments, and cash
- Money owed to you (by a government agency, ex-spouse, private entity, or otherwise)
- Any assets related to a business you own
General Arkansas Chapter 13 Bankruptcy Exemptions
The state of Arkansas has some exemptions that bankruptcy filers can use to protect certain assets and property. These include:
- All clothing
- $200 of personal property ($500 for a married person or head of household)
- Heads of household may also exempt the value of their homestead (without limit) on a quarter-acre urban lot, or on an 80-acre rural plot of land
- Arkansas residents are also eligible to choose the Federal bankruptcy exemptions if those exemptions allow them to protect more property; for those who are not married or heads of household, this is the best choice (because an unmarried person using the Arkansas state exemptions is limited to exemptions for all clothing and for $200 of personal property)
A qualified Arkansas bankruptcy attorney can help identify additional exemptions available to you as these change regularly.
How Chapter 13 Bankruptcy Repayment Works
Over your specified repayment timeline, you’ll focus on repaying debt in three categories:
- Priority: student loans, child support, and most tax obligations will be required to be paid in full
- Secured: paid back over time, typically bringing past due up to current.
- Unsecured debt: can be reduced or forgiven in certain situations.
Chapter 13 typically stretches out repayment over several years and makes debt repayment more manageable. By building this plan, you can save important personal property like your home or automobile from foreclosure or repossession.
Keep in mind that this is primarily for individuals and businesses cannot file for Chapter 13, as they’ll most likely be moved towards Chapter 11. It’s also important to note that bankruptcy of any kind, especially one restructuring personal debt, is highly intricate. The court will review every last detail of your personal finances.
The specific stipulations to a repayment plan and the property you can keep vary widely based on the individual case. It’s important to speak with a knowledgeable Little Rock bankruptcy attorney to explore the best options for you. Natural State Law can help – Call (501) 261-0226 today to schedule a free consultation to discuss your personal situation.