5 Things to Know About Chapter 13 Bankruptcy

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What You Need to Know About Chapter 13 Bankruptcy

Has your debt from credit cards, medical bills, delinquent mortgage payments, and other bills reached an insurmountable amount that you cannot pay back under your current payment plans? There is a solution – Chapter 13 bankruptcy.

Learn more about Chapter 13 bankruptcy and how it can help you get creditors off your back and get out of debt.

What Is Chapter 13?

Chapter 13 allows you to reorganize your debts to pay them off under a new, revised payment plan. This can get creditors to stop harassing you while allowing you to pay off the debt in a new agreed-upon plan. Under this type of bankruptcy (unlike Chapter 7 bankruptcy), your assets are safeguarded against repossession or foreclosure. However, your mortgage debt is not forgiven – you will still need to make payments to keep your home.

Under Chapter 13, you typically have three to five years to pay off your debts. You can work to eliminate unsecured debts while paying off secured debts – like missed mortgage payments.

A court-appointed trustee will collect the payments and distribute them to your creditors.

Who Should File Chapter 13 Bankruptcy?

Chapter 13 is for those who have income coming in but don’t have enough money to pay off all of the debt at once. Sometimes referred to as the Wage Earner’s Bankruptcy, this type of bankruptcy is an alternative to liquidation.

What Information to Provide During a Chapter 13 Bankruptcy Case

While filing Chapter 13 bankruptcy, you will need to provide numerous documents and financial information to the courts. Some information you will need to provide includes:

  • A list of creditors and the amount of money you owe.
  • The amount of your income and where it comes from.
  • A list of all of your property and assets, including any contracts or leases in your name.
  • Your monthly living expenses.
  • A copy of your most recent federal tax return and a statement of any unpaid taxes.

While this is a general list, your bankruptcy lawyer will help you determine what additional information you should provide. It’s important to work closely with your attorney to ensure you are submitting the correct documents, in the right formats, and are providing the court with proper proof of your finances.

Qualifications for Chapter 13 Bankruptcy

To file Chapter 13 bankruptcy, you need to be an individual with the means to make regular monthly payments. You will need to prove your sources of income – whether it’s from an employer, a pension, Social Security payments, unemployment, royalties, rent, proceeds from a sale, or other sources. You also need to be current on your tax returns.

Businesses are not allowed to file Chapter 13. Also, stockbrokers and commodity brokers cannot file – even if it’s for personal debts.

How Chapter 13 Bankruptcy Is Different from Chapter 7

When considering filing bankruptcy, you might be trying to decide between Chapter 13 and Chapter 7. The main difference between the two is with Chapter 7 bankruptcy, you must liquidate assets to repay creditors. This can result in the foreclosure of your home. Also, with Chapter 7, any cosigners you used on a loan are still obligated to pay off the debt.

Under Chapter 13, you can keep your property – you just have more time to repay what you owe. Also, your cosigners are protected against collection if the Chapter 13 settlement requires you to repay the debt.

Contact a Chapter 13 Bankruptcy Lawyer Near You

To learn more about filing Chapter 13 bankruptcy, it’s important to hire an experienced attorney to help you through the process. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.

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