When it comes to bankruptcy, a lot of people think that they’re at a loss and there’s nowhere else to turn. They’ve just been given news that they can’t handle their debt and they have to declare bankruptcy and they can’t move forward in life and make those purchases such as a car or even at home. Filing for bankruptcy doesn’t necessarily mean that all your clothes will be taken off your back and he’d be kicked on the street to fend for yourself. That really isn’t the case, and quite frankly it’s far from. Even in bankruptcy, there’s a light at the end of the tunnel, understanding Chapter 13 Bankruptcy is the closest thing to landing with a parachute and getting everything rolling again.

Often known as wage earners bankruptcy, this type of bankruptcy allows an individual who has enough income to repay some or all of the debt they owe. You’re presented with a 3 to 5-year payment plan where you would make installment that goes towards paying off your debt. So where can I touch a little bit on chapter 13 bankruptcy and give you the rundown on everything you need to know.

Chapter 13 Eligibility

Depending on the type of income you have, if it’s above the statement of up your repayment plan will be 5 years. Likewise, if your income is below the state median, you will be paying your debts off in 3 years.

There are some qualifications you have to meet before you be eligible for chapter 13 bankruptcy. See the list below to get a better idea whether or not you qualify for chapter 13 bankruptcy.

  • You will need a regular income
  • Unsecured debt cannot exceed: $394,725
  • Secured debt cannot exceed: $1,184,200
  • Provide current tax returns and payments
  • You cannot have filed bankruptcy in the past 180 days and have had it dismissed for certain reasons. (i.e. failing to appear or compiling with court orders)

If you meet all the criteria on the list above you should be in the clear when you file for chapter 13 bankruptcy. Although there could be slight instances where you’re on able to be approved for bankruptcy. statistically, anyone, who files for chapter 13 bankruptcy there’s a 50-50 chance he’ll be approved, as well as Denied. So if you were approved the Great get the ball rolling and have the fresh start you need. Although if you’ve been denied, you must be wondering what your next steps are?

Well, one thing you can do is definitely looking to debt relief options. You can call a local debt relief expert to help you out.

Debts I have to Pay?

When we are looking at the type of debt that you have to repay under chapter 13 falls into three different categories.

Priority Debt. These must be fully repaid, and like the name says it has priority. Things such as child and spousal support, unpaid tax bills and any fees associated with your bankruptcy.

Secured Debt. Reducing the amount you owe on secured debt such as your home or car.

Unsecured Debt. Anything that is not held alongside collateral can be paid off once you have completed the repayment plan.

Benefits of Chapter 13

Keeping the house. You’re behind on your mortgage payments you’ll have the opportunity to catch up to the repayment plant and save your home from foreclosure.

Consolidation. Essentially chapter 13 is a consolidation loan where you send a payment to a trustee. And then this trustee distributes your payments to any of the creditors you owe.

Credit Reports. I know this may sound a little bit counterintuitive but when it comes to bankruptcy Chapter 13 only stays on your credit report for 7 years. When compared to its counterpart chapter 7 which states on your credit report for 10 years.

Co-signer. If you’ve had co-signer chances are they are safe from any creditors seeking relief. So they don’t have to worry about anyone coming that hounding them for money unless authorized by the bankruptcy court.

Disadvantages of Chapter 13

Credit. It goes without saying that if you file bankruptcy it will heavily reflect on your credit. Chapter 13 will remain on your credit report for about 7 years. The severity of your credit score drop will be determined based on your current scores at any factors that pertain to your financial situation.

New Credit. Due to a lower credit score and most of your money being tied up to debt payments and living expenses you may find it hard to get a new job, or even qualify for any new type of credit.

Second Chances. This one may be the hardest one for you, there’s no Second Chances when it comes to bankruptcy. So if you’re not on time with your payments and you actually miss some it can lead to a dismissal. If you have been dismissed from your bankruptcy case there is a possibility that you can lose any of the assets you’re trying to protect.

The Process (Simplified)

There is quite a bit of a process that you have to undergo in order to be qualified for chapter 13 bankruptcy. So when you decide to file for bankruptcy here are the steps that you need to follow.

  1. Credit counseling
  2. Get an attorney
  3. Paperwork
  4. Submit bankruptcy petition
  5. Submit payment plans
  6. Meeting creditors
  7. Confirming the hearing
  8. Payment
  9. Debt education course

This is just a simplified version of what the actual process is. If you’re looking for more information on the entire process for chapter 13 we advise you seek legal advice.

Bankruptcy is a serious thing, so if you’re considering filing for chapter 13 we definitely recommend that you consult free legal advice. They’ll be able to give you the most accurate information based on your specific situation. The information we’ve given you above is just a general guideline for you to understand what chapter 13 bankruptcy consists of. So if you decide that you’re going to go ahead with that, make sure that you can keep up with all your payments so that way you don’t lose any of the assets or trying to protect.

If you think that there are negative entries on your credit report that should not be there give us a call in one of her local professionals can help you with anything credit repair.