How Do I Qualify to File for Chapter 13 Bankruptcy?

  • By:David Bate

Medical Malpractice Lawyer

Chapter 13 bankruptcy provides a means for people who are struggling with a large amount of debt by designing a repayment plan to make it simpler to pay back their debts.

A debt repayment schedule is set up to run over a three to five year period. After the repayment period, some of the debts remaining could be totally wiped out or discharged, removing the remaining amount of money owed to your creditors.

The repayment commitment limits the amount of money you pay monthly to no more than fifteen percent of the money remaining after you pay living costs that are essential. This additional money is called disposable income.

Not everyone can qualify to file for Chapter 13 bankruptcy. In order to meet the requirements you much have:

  • Secured debts under $1,184,200. These are loans, such as a mortgage, or automobile loan where the house or car is used as collateral for the loan.
  • Unsecured debts need to be below $394,725. This type of debt includes medical expenses and credit card debt.
  • A regular income is required to file for Chapter 13

What Do I Do If I Want to File for Chapter 13 Bankruptcy?

You must file a petition for Chapter 13 bankruptcy with a United States Bankruptcy Court. It is advisable to obtain an attorney to help you with the process. Attorneys are well versed in consumer bankruptcy and can assist you in filing all the appropriate forms. There are several mandatory documents that need to be submitted, along with a report that details terms for debt repayment. The court will appoint a bankruptcy trustee. This person will go over your plan and get in touch with your creditors and then give the approval for your plan to repay your debts.

How Does the Three to Five Year Repayment Plan Work?

If the amount of income in your household is above the median in your state, the repayment plan will be five years. If after that period of time you have followed the plan to repay your debts, a portion of the debt remaining will be forgiven or ‘discharged’.

If the income in your household is below that of the median in your state, payments run for three years. After the three years, a portion of your debts will be eligible to be discharged.

Are There Debts that Cannot Be Discharged?

There are certain debts that are required to be repaid in full. These include:

  • Tax bills that you owe from the last three years
  • Spousal and child support
  • The cost for filing for bankruptcy, including attorney and fees to file for bankruptcy
  • Student loans in most cases
  • Mortgage on your home
  • Car loans unless you owe more than the current value of the home

Debts That Can Be Discharged

Unsecured debt, such as credit card debt or unsecured loans will be fully discharged once you finish the repayment plan mandated by the court.

Contact An Attorney

You will be able to keep your home when you file Chapter 13 bankruptcy as long as you keep your payments current. You may also be required to take a course in financial counseling in order to have the bankruptcy discharged. A chapter 13 bankruptcy lawyer Memphis, TN trusts is available to answer your questions concerning filing for Chapter 13 bankruptcy.

 


 

Thank you to our friends and contributors at Darrell Castle & Associates, PLLC for their insight into bankruptcy and how to qualify for chapter 13.

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