What is Bankruptcy?
Under Chapter 13 Bankruptcy, a debtor will submit a 3-5 year repayment plan to the creditors for the debtor’s future income to be paid off. Chapter 13 may be used to make up for a missed mortgage or car; stop a house foreclosure; stop interest from subtracting from your tax debt; pay back taxes; and more. It is a form of abuse prevention that protects debtors from lawsuits from the creditors.
Benefits of Chapter 13 Bankruptcy
- You can pay what you can afford. Chapter 13 allows debtors to make a debt repayment plan that you can stick to. Your debt-payment is based on how much you are willing to pay which you proposed under the bankruptcy court. Basically, your budget is a combination of chapter 13 trustee, monthly living expenses, and IRS standards. This combination will deduct your profit, which is the amount you must pay to the bankruptcy trustee each month.
- Debts Discharged. If you cannot repay your debts 100% in 3-5 years, these debts will be discharged. In short, they will be wiped-out, hence, you will receive a fresh start. In the event that you can pay the full amount of your debt in 3-5 years, you will get the advantage of Chapter 13 bankruptcy as it provides the most efficient debt repayment plan for you.
- Save your home. If you have a mortgage that is past-due, Chapter 13 can absorb it and pay it down over a period of 3-5 years under your plan. For as long as you filed a bankruptcy petition prior to the foreclosure sale date, you can take advantage of this feature.
- Removes Higher Mortgage. What if, after filing bankruptcy, you can only afford your first mortgage? Lien stripping is the solution – it allows you to revoke your second mortgage to retain your first mortgage only. To have this benefit in Chapter 13, the value of your home must be less or equal to the amount of your first mortgage on the day your petition for bankruptcy is filed.
What are the Consequences of Bankruptcy?
The first and perhaps the most common consequence of bankruptcy is losing your personal-property. Both bankruptcy forms will require you to surrender your possessions in order to repay the creditors. Under other circumstances, bankruptcy can also entail losing vehicles, jewelry, real estate, and other possessions.
Second, your bankruptcy may indirectly affect other people financially. If your mother cosigned a loan for you, they can be held liable for some portion of your debt once you filed a petition in bankruptcy.
Lastly, some offices may take bankruptcy on your credit report negatively. Once they see a bankruptcy on your credit file, they might decline offering the credit to you or rather impose a higher interest rate which will become disadvantageous for you.
What Requirements Do I Need for Chapter 13 Eligibility?
- In order to file for Chapter 13 bankruptcy, an individual must have less than $419,275 in unsecured debt, which might include personal loans or credit card payments. You must have no more than $1,257,850 in secured debts, including vehicle loans and mortgages.
- Corporations, LLC, and businesses, albeit they are personal, cannot file Chapter 13 Bankruptcy
- Individuals must prove that they have the capacity to pay monthly dues.
- Within 14 days of filing bankruptcy, they must submit their source of income.
- You must also keep your tax files up to date; you must present proof that you have submitted federal and state tax returns for the last four years.
Call our Bankruptcy Attorney Now!
There is no doubt that having a lot of debt puts a lot of limits on you, especially if you are subject to creditor harassment. Chapter 13 bankruptcy offers protection as well as financial independence. It is vital that you have effective ways of resolving your financial difficulties before it is too late to affect your future decisions.
Filing for Chapter 13 bankruptcy is not something that everyone can do easily. It necessitates the presence of someone who is experienced, knowledgeable, knows the law, and can demonstrate due diligence in their job. With all of the successful bankruptcy cases that our law firm has handled previously, Robert Russell Law Office has a proven track record since 1989. If you need assistance to be qualified for Chapter 13 bankruptcy, our bankruptcy attorneys can help. Aside from bankruptcy, we also offer debt settlement and estate planning services. Call our office today to find out your Chapter 13 eligibility.