Most people know about the bankruptcy law that helps people liquidate their assets in order to pay off their debt, known as Chapter 7. But, some people may not know that they could be able to reorganize their debts under Chapter 13 bankruptcy law, which is sometimes preferable to Chapter 7 bankruptcy. A Chapter 7 bankruptcy may use all of the filer’s assets to repay debt. Chapter 13 bankruptcy, however, helps reorganize the filer’s existing assets and debts in order to regain a firm financial footing.
The eligibility factors for a Chapter 13 bankruptcy filing are more stringent than they are for a Chapter 7. Income is an important factor in order to determine eligibility to pay creditors. Very low income or even an irregular income may make someone ineligible to qualify for Chapter 13 bankruptcy. Chapter 13 also requires eligibility criteria in regards to the total debt owed. The limit set for filing for Chapter 13 bankruptcy proceedings generally is $1,010,650 for secured debts and $336,900 for unsecured debts.
Getting the right information about the available options can be an asset when filing for Chapter 13 bankruptcy proceedings. At the very outset, the filer has to obtain credit counseling by a US Trustee office registered credit agency. After receiving credit counseling, an individual may then file for Chapter 13 bankruptcy proceedings using the necessary documents and fee.
Developing a repayment plan is one of the determining factors for Chapter 13 bankruptcy, and it may require copious amounts of paperwork. Any repayment plan once formulated must be extremely detailed.
A person may have to repay some of their debts in totality. These debts are termed “priority debts” in the repayment plan. Taxes, child support and other payments are often placed under priority debts. Repayment plans may also include the repayment of unsecured loans. Contingencies also need to be formulated for any potential disposable income, as well as a good faith principle that must be followed during a Chapter 13 repayment plan.
Source: FindLaw.com, “Chapter 13 Reorganization Bankruptcy,” accessed on Sept. 11, 2014