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.