Many people encounter financial problems at some point in their lives, and for those with a regular income whose debts have become too much, one option for financial recovery is through the use of Chapter 13 bankruptcy. There are important differences between Chapter 13 and other types of bankruptcy, and the experienced bankruptcy lawyers at the Cornwell Law Firm are here to help you understand your legal options. To learn more, call or contact our office today to schedule a consultation.
Who Qualifies for Chapter 13?
Only certain people qualify for Chapter 13 bankruptcy. In order to utilize this form of bankruptcy, the filer must earn a regular income in order to be able to pay off their debts on a repayment plan. The filer must be an individual, as businesses do not qualify for this type of bankruptcy, and there are limits on the amount of debt that a person can have in Chapter 13 proceedings. Currently, the limits are set at $394,725 for unsecured debts and $1,184,200 in secured debts. Someone interested in filing for Chapter 13 also cannot have filed for bankruptcy in the preceding 180 days and must have completed counseling prior to submitting their petition for Chapter 13 bankruptcy.
How Chapter 13 Bankruptcy Works
After submitting the petition for Chapter 13 bankruptcy and paying the filing fee, this method of bankruptcy establishes a repayment plan based on the amount and type of debts that the filer has with creditors. Unlike Chapter 7, known as a liquidation bankruptcy, where the debtor’s assets are sold off to pay creditors, a Chapter 13 bankruptcy allows the filer to keep their assets and pay off their debts over time. An automatic stay applies as soon as the bankruptcy petition is filed, which also keeps creditors from repossessing property or engaging in collection efforts while the proceeding is ongoing.
As part of the bankruptcy proceeding, the filer must submit many documents that details their income and the debts currently incurred. This includes, but is not limited to, the following:
- A list of creditors and the nature of their claims,
- The sources, amounts, and frequency of the debtor’s income,
- A list of all the debtor’s property, and
- A detailed list of the debtor’s monthly living expenses
A bankruptcy trustee is assigned to the case who reviews the documentation submitted and helps create a repayment plan. This plan often consolidates multiple debts into a single payment that is sent to the trustee, who then distributes it to creditors in a prioritized manner. Secured debts are typically paid off before unsecured debts, and the repayment plan lasts between three to five years. To learn more about the Chapter 13 bankruptcy process, talk to our office today.
Are you interested in learning more about filing for Chapter 13 bankruptcy or your other legal options? Call the office or contact us today at the Cornwell Law Firm in Duluth to speak with a knowledgeable Georgia bankruptcy lawyer.