chapter13bankruptcyinformation.net

As tragic as it may be, personal, or family finances can often encounter unpredictable circumstances which result in mounting or insurmountable debt. This can occur because of catastrophic medical circumstances, business failures, or job loss. Another common reason for considering bankruptcy lies in consumer debt. The accumulated debt is not always incurred through frivolous or careless spending. Many individuals use personal credit cards as a form of seed capital or credit for the nascent businesses. When their businesses fail, their ability to pay their monthly bills is diminished or completely eliminated.

Credit cards are often a source of debt which the former circumstances can aggravate. When other solutions such as debt counseling or debt consolidation do not work, bankruptcy may be a viable option. It should not be entered lightly but should be a realistic option under consideration. As in all legal scenarios, an attorney should be consulted.

One option is chapter 13 bankruptcy. This is often referred to as a wage earners’ bankruptcy.  This option allows individuals with expected stable incomes to formulate a plan to pay back all or part of their total debts during a maximum of five years.

Under this option, debtors typically propose a repayment schedule based on the individual or family’s ability income. Installments to creditors are made for a usual period of three to five years. In cases where the debtor’s monthly income is less than the state mean a three year plan is typically adopted unless the supervising court allows for a different time period. The converse is also true. Incomes above the state’s mean will require the amount of time to be five years. Collection efforts by debtors are permitted outside of the court approved plan.

There are a number of requirements to determine eligibility. For example, individuals both self-employed or regularly employed are eligible as long as their secured debts and unsecured debts are below certain amounts established by law. These amounts change from time to time so it’s important to review the required amounts at the time you are considering filing. It’s also worth noting that a corporation or partnership may not be a chapter 13 debtor.

Notable exceptions to chapter 13 eligibility include individuals who have had prior bankruptcy petitions dismissed due to the debtor’s willful failure to appear before the court.  The timeframe for this is typically three months. Other exceptions include failure to comply with court orders or were voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. Debtors must also take a credit counseling course and file a copy of the debt repayment plan developed.