Filing for Chapter 13 Bankruptcy

There are 5 types of bankruptcy. One of them is chapter 13 bankruptcy. It is unlike chapter 7 which allows the debtor to keep all his or her properties even exempted properties and doesn’t involve liquidation. Chapter 13 bankruptcy is usually called as “wage earners” bankruptcy.

In chapter 13 the debtor is given time to repay their creditors. These are people usually with enough income to pay the debt. A typical problem is when the creditors demand early payment, therefore filing for chapter 13 can help.

When you file chapter 13 bankruptcy, it takes around 3 to 5 years. A chapter 13 bankruptcy requires one to live under the supervision of the court and the trustee which will collect and distribute your payments to the creditor. This is unlike a chapter 7 bankruptcy, which takes four to six months to discharge.

QUALIFICATION FOR CHAPTER 13 BANKRUPTCY

To file a chapter 13 bankruptcy, you will have to provide the court with evidence within 14 days that you have enough income to repay your debt after excluding a certain amount of allowed expenses.

You may not qualify for a Chapter 13 bankruptcy if your debts are too high that is your secured and unsecured debts exceed your income.

You also have to give a proof of filed state and federal tax returns for the past 4 years and if you can’t produce the proof your case can be delayed.

PROCESS FOR CHAPTER 13 BANKRUPTCY

The first right step to take if you are filing a chapter 13 bankruptcy is to hire a bankruptcy lawyer, although you can file a case yourself, there are many laws, rules, and regulations which needs professional guidance.

Then you will need to complete official bankruptcy documents and take a prefilling credit counseling course .
Prepare a repayment plan and submit it to the court, the bankruptcy court must approve your plan to be eligible for chapter 13 bankruptcy.

Before you file a chapter 13 bankruptcy case you should consider the advantages and disadvantages of chapter 13 bankruptcy.

ADVANTAGES

1. Your properties and possession are not at risk to repay your debt
2. The creditors are not permitted to contact you
3. You have to pay your debt monthly with your repay plan
4. Chapter 13 bankruptcy stays on a credit record for a less than a chapter 7
5. You will have more time to pay your debt through the restructuring process

DISADVANTAGES

1)Chapter 13 takes much longer time for the discharge of the case than a chapter 7

2)When you are in the repayment period, any disposable income should be directed towards your debt. Which means you may need to live a frugal lifestyle.

3) Chapter 13 bankruptcy is more expensive than a chapter 7 bankruptcy.

Once you have filed the chapter 13 bankruptcy you can no longer file chapter 7 bankruptcy at least for 6 years.