Consumers considering filing for bankruptcy generally have two separate options which include Chapter 7 bankruptcy and Chapter 13 bankruptcy. For those with the option to file for Chapter 13 bankruptcy, they may be wondering if this option is right for them or not. Understanding what is involved in filing can assist each individual in making the right choice for their unique circumstances.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a type of bankruptcy that is filed for those who do not meet the income requirements for Chapter 7 bankruptcy. Chapter 7 requires a means test to determine income and for those who make enough money to manage their debts, Chapter 13 is the option that they will have to take. Unlike Chapter 7, Chapter 13 does not involve complete liquidation. Instead the debtor can retain all of their assets whether or the property is exempt. In addition, Chapter 13 may be more expensive than the alternative because it is more complex and takes a longer amount of time.
How long does Chapter 13 bankruptcy take?
Chapter 13 bankruptcy involves the development of a debt repayment plan and for this reason it can take a long time and last from 3 to 5 years. However at the end of this payment plan, the consumer will have more of a handle on their debt and will be able to be more financially sound.
What is involved in Chapter 13 bankruptcy?
In Chapter 13, there is a trustee appointed who the consumer has to make regular monthly payments to. The plan can last for a period of 3 to 5 years and different factors will affect the length of time including the amount of debt to repay and whether or not the income is above or below the median income for the State of residence. In Chapter 13 bankruptcy, the debt is completely reorganized and monthly payments are made using the the individual’s disposable income.
Which debts are mandatory to be repaid?
Mandatory debts that need to be repaid with Chapter 13 bankruptcy include domestic support payments such as alimony and child support, as well as tax debt. Unsecured debt may not have to be included in the payment plan. In order for the payment plan to be accepted, it must meet a test called “the best interest of creditors test.” This ensures that creditors are paid at the very minimum what they would have received in Chapter 7 bankruptcy.
To find out whether or not Chapter 13 bankruptcy is right for you, meet with an attorney from Smeloff & Associates. Schedule an appointment when you visit them online at website.
