Personal Bankruptcy Options
(Note – this is not legal advice. Please consult with an attorney to discuss your particular circumstances in relation to filing for bankruptcy.)
CHAPTER 13 – INDIVIDUAL DEBT ADJUSTMENT
A Chapter 13 bankruptcy allows a debtor to pay off debts over a period of time. Chapter 13 is typically used where a debtor earns too much income to qualify for Chapter 7. The debtor will make a payment to the trustee over a period of three or five years. A few questions relating to the differences between Chapter 7 and Chapter 13 follow:
Why would I file Chapter 13?
A debtor would file Chapter 13 if his or her income was too high to qualify under Chapter 7, if the debtor wants to save his or her home from foreclosure (because they can catch up on delinquent payments over time), or where debtors want to protect third party consignors from becoming liable on the entire debt.
Are there any eligibility limits?
Typically, a debtor’s unsecured debts must be less than $336,900 and secured debts must be less than $1,010,650. Consult with attorney for other eligibility requirements.
What is the process?
The debtor must share certain information with the bankruptcy court, such as income, monthly expenditures, assets and liabilities. The trustee then holds a meeting of creditors where the trustee and creditors may ask the debtor questions under oath. After this meeting, the trustee, creditors, and debtor will come together for a hearing on the debtor’s proposed repayment plan. Once the payment plan is approved, the debtor is discharged from most debts and begins making monthly payments.
Is a Chapter 13 bankruptcy similar to a consolidation loan?
While the repayment plan is similar to a consolidation loan, in that creditors are paid off on a monthly basis, the entire amounts of the unsecured debts are not usually paid. The debtor only has to pay over disposable income and the creditor must receive only as much as they would have received if the debtor’s assets were liquidated under Chapter 7.
What if my home is already in foreclosure?
A Chapter 13 bankruptcy filing can allow the debtor to catch up on arrears and as long as the petition is filed before the sale date, the foreclosure can be stopped.
Will I still be able to get a mortgage modification if I file a Chapter 13?
No, but the amount the debtor owes in arrears can be made up over the life of the plan.
