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Who Can File Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a legal process that allows individuals with a regular income to develop a plan to repay all or part of their debts over a period of three to five years. It is often referred to as a “wage earner’s plan” as it allows individuals to use their income to repay their debts while retaining their assets. This article will explore who can file for Chapter 13 bankruptcy and answer some frequently asked questions.
Who is eligible to file for Chapter 13 bankruptcy?
1. Individuals with regular income: To qualify for Chapter 13 bankruptcy, you must have a regular source of income. This includes wages, self-employment income, rental income, and even retirement benefits. The court will review your income and expenses to determine if you can meet the repayment obligations outlined in the proposed plan.
2. Debt limitations: There are certain debt limitations for Chapter 13 bankruptcy. As of 2021, your unsecured debts must be less than $419,275, and your secured debts must be less than $1,257,850. These limits are adjusted periodically to account for inflation.
3. No recent bankruptcy discharge: If you have received a discharge in a previous bankruptcy case, you may have to wait for a certain period of time before filing for Chapter 13 bankruptcy. The waiting period varies depending on the type of bankruptcy you previously filed.
4. Completed credit counseling: Before filing for Chapter 13 bankruptcy, you must complete credit counseling with an approved agency within 180 days. The agency will review your financial situation and provide you with information on alternatives to bankruptcy.
5. Tax filings: You must have filed all required federal and state tax returns for the past four years before filing for Chapter 13 bankruptcy. Failure to do so may result in your case being dismissed.
Frequently Asked Questions about Chapter 13 Bankruptcy
Q: Can I keep my assets if I file for Chapter 13 bankruptcy?
A: Yes, one of the key benefits of Chapter 13 bankruptcy is that it allows you to keep your assets while repaying your debts. However, you must propose a plan that provides for full or partial repayment of your debts over the specified period.
Q: How long does Chapter 13 bankruptcy last?
A: The repayment plan in Chapter 13 bankruptcy usually lasts for three to five years. The specific duration depends on your income and the amount of your debts.
Q: Will filing for Chapter 13 bankruptcy stop foreclosure or repossession?
A: Yes, filing for Chapter 13 bankruptcy can temporarily halt foreclosure or repossession proceedings. It allows you to catch up on missed mortgage or car loan payments over the repayment period.
Q: Can Chapter 13 bankruptcy remove a second mortgage or home equity loan?
A: In certain circumstances, Chapter 13 bankruptcy can eliminate or “strip off” a second mortgage or home equity loan if the value of your home is less than the balance owed on the first mortgage.
Q: Will Chapter 13 bankruptcy eliminate all my debts?
A: Chapter 13 bankruptcy allows you to repay a portion of your debts over time. At the end of the repayment period, any remaining eligible debts are generally discharged.
Q: Can I convert my Chapter 13 bankruptcy to Chapter 7?
A: In some cases, you may be eligible to convert your Chapter 13 bankruptcy to Chapter 7 if your financial circumstances change significantly. A bankruptcy attorney can guide you through the process.
In conclusion, Chapter 13 bankruptcy provides individuals with regular income an opportunity to repay their debts while retaining their assets. Eligibility is determined by factors such as income, debt limitations, and completion of credit counseling. It is important to consult with a qualified bankruptcy attorney to understand the specific requirements and implications of filing for Chapter 13 bankruptcy.
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