Chapter 13 Bankruptcy Rules
The Chapter 13 bankruptcy rules set the stage for your eligibility to file Chapter 13 bankruptcy, and the legal requirements for paying your debt under a Court approved plan. Many consumers struggle to keep up with debt payments, but don’t consider bankruptcy an option. Sometimes that’s because they have substantial income and believe they won’t qualify, or because they fear they’ll lose their property. With a Chapter 13 bankruptcy, you typically keep all of your property as long as you stay current on your secured debt payments, and make up any past due payments. You’ll also need to pay at least the value of your non-exempt property, if any, to unsecured creditors through your repayment plan. Together, we’ll look at your financial situation and overall goals to decide whether a Chapter 13 bankruptcy is the most beneficial financial decision for you.
There are two main factors that contribute to your eligibility to file a Chapter 13: your income and your debt. You’ll need to demonstrate to the court that you have enough income to cover your secured debt payments, repay priority debts, cover basic living expenses, and otherwise comply with the bankruptcy laws. Payments on unsecured debts will vary from case to case, and sometimes may be repaid at a small percentage. We’ll work together as we build your case and propose your repayment plan, utilizing all your various sources of income. This doesn’t just mean a wage from a job. Your income would also include certain benefit payments, child support or alimony, rental income, proceeds from the sale of assets, and your spouse’s income.
In addition to income requirements, there are upper limits to how much debt you can have and still be eligible to file Chapter 13. Secured debts, such as a mortgage or car loan, cannot exceed $1,148,525. Unsecured debts, such as medical bills, credit cards, utilities, back rent, and personal loans, may not exceed $383,175.
In order to qualify for a Chapter 13, you must also have filed all tax returns (or an applicable extension). Additionally, Chapter 13 bankruptcies are only for individuals and sole proprietorships, not business entities. If you own a corporation or limited liability company, and need to file bankruptcy for that entity, we can discuss other chapters of bankruptcy that may be a better fit.
Chapter 13 Payment Plan
We’ll consider your income and debt as we design and negotiate your payment plan, which could last between three and five years. If your income is higher than the median income for your state and household size, your plan will most likely last five years. If your income is less, we can propose a three-year plan. However, even if you are under the median, some people will still benefit from a five-year repayment plan if time is needed for payment of taxes or other priority debt. During this time, you’ll make payments to the court trustee who will then distribute them to your creditors as determined by the confirmed Chapter 13 plan.
Bankruptcy doesn’t have to mean wiping your financial slate clean and starting over from nothing. With a Chapter 13 bankruptcy, you’ll keep the property and assets you’ve worked so hard to earn, while also getting some help to put your debt behind you.
Davidson Backman Medeiros PLLC Can Help
Davidson Backman Medeiros PLLC helps individuals file for bankruptcy under Chapter 7 and Chapter 13 in Spokane, Seattle, and throughout Washington and Idaho. Davidson Backman Medeiros PLLC is a debt relief agency under federal law. We’d appreciate hearing from you with your comments and suggestions.