Chapter 13 bankruptcy is one of the two most prominent types of bankruptcy options available. You may have heard of chapter 13 bankruptcy and chapter 7 bankruptcy before, but not many people are very familiar with what they look like, who they’re for, and how they can help. Filing bankruptcy isn’t anything to be embarrassed about and it is often the best course of action for some families. In today’s blog from our team here at Sanchez Garrison & Associates, LLP, in Baltimore, we are going to take a closer look at chapter 13 bankruptcy.
Looking for a bankruptcy attorney in Maryland? Contact us at Sanchez Garrison & Associates, LLP today.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is sometimes referred to as the reorganizational bankruptcy. This is because instead of eliminating your debt with the heavy consequences of chapter 7, you’re able to negotiate with your creditors to reorganize your debt into a manageable repayment plan in a Chapter 13 filing. Chapter 13 bankruptcy is often pursued by those who do not qualify for chapter 7 bankruptcy. Chapter 13 is a legal way that you can regain control of your financial situation and set yourself up for success in the future.
How can it help?
Filing for bankruptcy of this type can help you take control of your debt and secure a more promising financial future. The thing that is most alluring to people about chapter 13 bankruptcy is that it will prevent any creditors from taking action against you. This means no more calls, they can not foreclose your property, and they can not repossess your vehicles during the chapter 13 repayment period.
Chapter 13 bankruptcy can also help you by reconsolidating your debts into a manageable repayment plan. The repayment plan will be something that is reasonable and that you can afford without significant hardship.
Chapter 13 bankruptcy gives you breathing room by ensuring that creditors cannot legally harass you every day. It also helps you come up with a plan that both you and your creditors can agree upon. This plan is a manageable amount that will help you get back on your feet when it comes to financial woes.
What are the requirements?
Just like with chapter 7 bankruptcy, not everyone qualifies for chapter 13 bankruptcy situations. To be certain if you qualify, we recommend contacting a bankruptcy attorney like ours here at Sanchez Garrison & Associates, LLP, in Baltimore. However, some of the most common qualifications for chapter 13 bankruptcy include:
- Paying necessary fees and wages like filing fees, court fees, and bankruptcy lawyer charges
- Providing details about who you owe money to and how much
- Providing details about your monthly expenses like leases, contracts, and more
- Providing a detailed monthly budget showing all income and expenses
- Providing tax information
- You must have no more than $394,725 in non-exempt debts like credit cards, medical expenses, etc.
- You must have no more than $1,184,200 in exempt debt like mortgages, car loans, etc.
- You can not be a business owner
- You must be able to prove that you have a reliable source of income to make payments toward your debt
There are almost certainly more requirements than those we have listed above that depend on your exact situation. For more information on qualifying for chapter 13 bankruptcy, schedule a free consultation with us at Sanchez Garrison & Associates, LLP, in Baltimore.
What does the process look like?
Oftentimes, even people that do qualify for chapter 7 bankruptcy will still choose to file for chapter 13 bankruptcy. This is because overall, chapter 13 bankruptcy doesn’t have quite as many negative impacts. You don’t have to liquidate all of your assets to pay debtors, your co-signers are protected, and you and your debtors reach an agreement that works for both sides. This is because of the way that chapter 13 bankruptcy is set up.
During your hearing, the payment amount and payment period will be established and agreed upon by both you (and the help of your counsel) and your debtors. Once the repayment details are settled, you are then designated a court-appointed trustee. This trustee is responsible for collecting your payments every month and distributing funds amongst your debtors. The repayment plan typically takes place over three to five years, and if there is any remaining debt at the end of the repayment period, it can sometimes be discharged. During your repayment process, no action in any way can legally be taken against you OR your co-signers.
Consequences
Filing for bankruptcy is never without consequences. But, depending on your situation, it can be the best course of action. When you file for chapter 13 bankruptcy, it will show on your credit report for up to seven years. This makes it difficult to apply on financing on anything. In most cases, though, you’re agreement forbids you applying for any new lines of credit. If you do secure more credit during the repayment period, your interest rates will be very high for the duration that the bankruptcy appears on your credit report.
Also, depending on your situation, your credit report can drop anywhere from 25 points to 125 points. For those who continue to make their payments on time, much if not all of your debt will be paid off during your repayment period. Should you miss payments or pay late, you may be forced to sell your assets to pay your debtors and will likely have to go back to court for a review of your repayment terms.
Call Sanchez Garrison & Associates, LLP
Neither chapter 7 or chapter 13 bankruptcy should be taken likely. For more information on chapter 7 bankruptcy, view our blog on chapter 7 bankruptcy or our chapter 7 bankruptcy page. Both come with their own set of benefits and consequences. Don’t try to handle filing for bankruptcy alone, call us at Sanchez Garrison & Associates, LLP, in Baltimore. We are bankruptcy attorneys with years of experience in bankruptcy law who will help you in any way we can.
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