Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy is available to consumers who don’t qualify for the common Chapter 7 bankruptcy process. Chapter 7 bankruptcy usually disqualifies you if you make more money for a household of your size.
Chapter 13 bankruptcy is your next best choice. When you file for this type of bankruptcy, you get to keep your assets that would otherwise pay off your existing debt if you filed for a Chapter 7 bankruptcy.
We understand how this short introduction may be complicated to most consumers. Bankruptcy in general is complex. The process is complicated even for attorneys.
Our lawyers at the Gil Law Firm, however, have been representing bankruptcy clients for over two decades. Our experience in filing thousands of bankruptcy cases has prepared us to handle your unique situation. Book a free consultation with us today to see whether a Chapter 13 bankruptcy is for you.
What is Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is a payment plan designed for consumers who earn steady and reliable wages. Your source of income is the main factor dictating whether you qualify for a certain bankruptcy case.
This bankruptcy case is like a declaration of doing your best to pay several creditors throughout three or five years. At the end of your case, the bankruptcy process will discharge any remaining balances on unsecured debts, such as medical bills and credit cards.
Chapter 13 Bankruptcy Qualifications
Chapter 13 bankruptcy is usually for wage earners who make money that exceed the state’s average expected household income. If you make more than the typical household of your size in your state, you would file a Chapter 13 bankruptcy. You can still file a Chapter 13 bankruptcy if you make less money than the average family of your size in your state.
Most consumers go for Chapter 7 bankruptcy if they qualify for it because it’s a much shorter process. Consumers take and pass a means test to see if they qualify for this option. If they earn less money than the average household of a certain size in their state, they usually qualify. They would then have to repay their debt in only four to five months.
The Chapter 13 bankruptcy process is longer. With Chapter 13 bankruptcy, you create a financial plan to pay off your debts through the bankruptcy court over a three to five year period. During these years, you will repay your debt in monthly installments, which will depend on your monthly income while you are bankrupt.
You will file a three-year plan to repay your debts if you make less money than the average household of a certain size in your state. If you make more than the median income for a family of your size in your state, then you would file a five-year plan.
You might wonder why you would want to repay your debts in bankruptcy over a longer period of time. Here are some benefits of filing for a Chapter 13 bankruptcy.
Chapter 13 Bankruptcy Benefits
Stop Creditor Harassment
Chapter 13 bankruptcy activates the bankruptcy court’s automatic stay, meaning most creditors must stop collection activities. This gives you some debt relief while you regroup during your ongoing bankruptcy.
Better Credit Faster
Bankruptcy alone gives you a bad credit score. You can expect huge drops in your credit score as soon as you file for any form of bankruptcy. Chapter 13 bankruptcy lasts seven years on your credit score. After seven years, your credit record will be free of damage from your bankruptcy filing. Compare this to the 10 years it takes for a Chapter 7 bankruptcy to remain on your credit record.
Keep Your Non-Exempt Assets
Chapter 13 bankruptcy protects your non-exempt property. Non-exempt properties are valuable assets like your home or car. These assets have a monetary value that the bankruptcy court can order to get taken away to cover your debts. This happens in Chapter 7 bankruptcy cases. With Chapter 13 bankruptcy, you get to keep all your assets.
Chapter 13 Bankruptcy Costs
There is no set price for a Chapter 13 bankruptcy case because how much you pay will depend on the following factors:
Note that your bankruptcy fees are fluid. If, throughout your case, you suddenly earn more than what you initially declared, your allocation to creditors will adjust accordingly. The same goes for when you suddenly earn less than what you initially declared. We’re here to help you throughout your entire Chapter 13 bankruptcy case to ensure everything is in place.
Chapter 13 Bankruptcy Payment Allocation
A Chapter 13 bankruptcy’s payment allocation involves hierarchies. As you file for Chapter 13 bankruptcy, you are creating a plan to pay different creditors over the course of three or five years.
Payments go to different creditors based on priority. Here is a list of main creditors who receive your payments through Chapter 13 bankruptcy:
Trustees and lawyers involved in your bankruptcy case get a portion of your monthly payments because these people handle and process your payments.
Loans you took out on your car or home get the next priority for your monthly payments.
Taxes and child support are some examples of priority claims that take a portion of your monthly payments.
Medical bills and credit card fees take the remaining funds after your monthly payments have gone to the other creditors. The bankruptcy court can wipe out any remaining balances at the end of your Chapter 13 bankruptcy case.
The Gill Law Firm Team Decades of Experience
The Gil Law Firm has over 20 years of bankruptcy experience. We have the expertise to navigate bankruptcy laws and offer the best debt relief solutions suited to your unique bankruptcy case.
Our professional attorneys have encountered countless bankruptcy cases, enough to tailor the representation you need during what we believe is a challenging time in your financial life. With our experience in handling various debt situations, we can easily find you the best route to meet your goals.
Drop us a line at (334) 401-4420 to schedule a free evaluation. Our professional lawyers are ready to review your unique financial situation and immediately identify your best options to move forward. With our expertise, we can effectively represent your case and steer you toward the best decisions while you go through bankruptcy.