When a person files for bankruptcy, they usually do so under either Chapter 7 or Chapter 13 of the federal Bankruptcy Code. Suppose you have available disposable income, want to keep certain assets after declaring bankruptcy, and believe you can stabilize your finances with a firmly structured payment plan. In that case, Chapter 13 bankruptcy may be your best option.
A Salt Lake City Chapter 13 bankruptcy lawyer can discuss how this filing process works and whether it might suit your unique financial needs and desires. If you elect to pursue this form of bankruptcy, your dedicated attorney will ensure you submit all the required documents and relevant information within the applicable court deadlines.
The most significant benefit to Chapter 13 bankruptcy is that, unlike in Chapter 7, it can allow a filing party to keep both exempt and non-exempt property. They will still have to pay off at least some of the debt they accrued through that property, but if they complete the payment plan central to their filing, the property in question will remain in their possession.
Additionally, filing for Chapter 13 bankruptcy grants an immediate stay on both wage garnishment and debt collection, and you can discharge more types of debts, depending on the circumstances. There are also far fewer limitations on when someone can file for Chapter 13 bankruptcy, and it is possible to file under this chapter more than once should it become necessary.
However, unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy reduces most debts, rather than canceling them outright. A person who files a Chapter 13 bankruptcy may still have to pay off some or most of their unsecured debts over three to five years. Debtors can restructure some secured debts, like car and truck payments, by drastically reducing high interest rates and extending the loans’ remaining term. In light of this, it is wise to consult a skilled Chapter 13 bankruptcy attorney before committing to this type of bankruptcy.
A debtor can only file for Chapter 13 bankruptcy if their secured and unsecured obligations are within the debt limits. Under Bankruptcy Code section 104(a), Chapter 13 debt limits change every three years, with the latest change in 2019 and the next change in 2022. The current Chapter 13 debt limits are $419,275 for unsecured debts (like credit cards and medical bills) and $1,257,850 for secured debt (like mortgages and car loans).
Chapter 13 candidates must also have a regular source of income. A local lawyer will provide crucial assistance determining whether an individual qualifies to file for Chapter 13 bankruptcy.
The main component of a Chapter 13 bankruptcy is a Plan of Reorganization. As the name implies, the plan reorganizes a debtor’s obligations so that the debt payments do not exceed monthly income. When a plan meets this goal, it is known as “feasible.” If the debtor cannot ensure the plan is feasible, the court will reject it. In addition to feasibility, a plan must also ensure that creditors receive as much money through the plan as they would have if the debtor filed a Chapter 7 liquidation bankruptcy. Plans that meet these requirements are “confirmed” by the bankruptcy judge, and after the debtor makes all payments under the plan, all remaining debt balances are “discharged” or eliminated.
Deciding to pursue a Chapter 13 bankruptcy can be either a matter of preference or necessity. Either way, it can be a complicated process that requires a lot of information and could be made more efficient with guidance from an experienced legal representative.
A knowledgeable Salt Lake City Chapter 13 bankruptcy lawyer will work to ensure that your bankruptcy filing fulfills all of the requirements so you can begin to regain control over your finances. To schedule a consultation, call today.