Also called a “wage earner’s bankruptcy,” Chapter 13 bankruptcy allows debtors to develop a plan in order to repay their debts over a period of three to five years. The idea is that, depending on your personal income, you’ll develop a process you can stick to and pay a certain amount towards your debts over an agreed amount of time.
Any individual who receives regular income—from employment, self-employment or running an unincorporated business, Social Security, Disability, VA benefits, unemployment assistance, child support, or any other source, so long as the income is regular and enables the debtor to make monthly payments—may file for Chapter 13 bankruptcy, as long as the total amount of unsecured and secured debts they have fall below a certain threshold. If you want to determine whether you qualify for Chapter 13 bankruptcy relief, reach out to Natural State Law, PLLC, to discuss the specifics of your situation.
At its core, Chapter 13 is about the reorganization of your finances or management of your total debt load. Most people who file for Chapter 13 do so either because they are delinquent on a vehicle or mortgage and need to cure the delinquency so the vehicle isn’t repossessed or the mortgage isn’t foreclosed, or because they had income or equity issues that made filing a Chapter 7 case inadvisable. Under Chapter 13, you’ll make a monthly payment to a trustee over a period of 36 to 60 months. The trustee will then distribute these payments among the creditors who have filed valid claims. This process can stop foreclosure proceedings and cure delinquent mortgage payments, keeping you on the path towards keeping your home. Chapter 13 also allows you to propose provisions in your plan to protect third parties involved with your debt, such as co-signers.
The backbone of every Chapter 13 case is the establishment of a payment plan. The goal of the plan is to help the petitioner pay off unsecured debts, like medical bills and credit card debt, more affordably. In many cases, unsecured debts will receive only a pro-rata distribution, or pennies for each dollar they are owed. The plan also allows the debtor to repay past-due financial obligations, such as house payments, income taxes, child support, and alimony payments over the plan term. However, you’ll still be responsible for covering your other non-bankruptcy related bills and financial obligations throughout the duration of the Chapter 13 plan. Sometimes, these payments can become overwhelming, especially if you experience a sudden job loss or another unanticipated life event. It’s a good idea to talk through all the aspects of filing for Chapter 13 bankruptcy with a knowledgeable attorney before you proceed.
Chapter 13 is an opportunity to consolidate your debt through a third party “trustee” and develop a plan to become debt-free within a certain amount of time. Additionally, you won’t have direct contact with your creditors, which can help you avoid contentious conversations. Contact Natural State Law, PLLC today to learn more about whether filing for Chapter 13 bankruptcy relief is your best bet to enjoy a brighter future.