Taking a Closer Look at Chapter 13 Bankruptcy
When planning to file bankruptcy, it can seem like there is an endless pile of tasks needing to be accomplished, from examining assets to filing documents. It all begins, however, with one key decision: which version of bankruptcy do I file? For many, the road starts at Chapter 13, a form of bankruptcy that has several key advantages for its filers. So now, let's take a closer look at the operations and benefits of Chapter 13 bankruptcy.
Chapter 13 bankruptcy is sometimes called “wage earner's bankruptcy,” as it commonly assumes that the filer is employed. This is generally assumed because, under the terms of the filing, filers are required to create a plan to pay off all or part of back debt, usually over a three-to-five year period. Chapter 13 bankruptcy begins with a “means test,” in which court officers determine the filer's income, and how it relates to the state median. If the current income is less than or equal to the median, the plan is a three-year plan, unless the court modifies the plan's length for a specific reason. No plan will ever go over five years, however.
A bankruptcy filing begins with what's known as the “automatic stay,” a term that essentially means most creditors cannot take further action against the filer, as a filing is in progress. Thus, calls from creditors can be referred directly to a lawyer, if such has been retained, and various other actions can't be undertaken once the filing is made. Some creditors do not fall under this, like those related to student loans or court proceeding-related payments like child support.
With the means test complete, and a filer's eligibility for Chapter 13 determined, the payment plan can be made. It commonly starts with a list filed with court administration officials, detailing all the creditors involved and the claims therein, information on the debtor's income streams, a list of property, and a detailed list of living expenses. With all that in hand, the decisions can be made on paying back the outstanding debt.
Since there's a payment plan involved, there's no real call for liquidation of a filer's assets. Debts secured by property—like a mortgage connected to real estate—must continue to be paid, or the property in question can be seized by the mortgage holder. A Chapter 13 bankruptcy generally won't protect against that kind of debt action, so it's worth keeping in mind. Some other kinds of debt commonly aren't discharged either, like student loan debt, anything relating to a court action like traffic fines or alimony, and some other types.
In the end, for those planning to file any kind of bankruptcy, a good place to start is by hiring a qualified attorney. Those who have legal representation actually have a significantly higher chance of success in any court case to follow, regardless of whether filing a Chapter 13 or Chapter 7 bankruptcy, studies have found. That makes the decision to hire legal help a no brainer.
Our experienced bankruptcy attorneys at ZocLaw.com have been helping individuals with their Chapter 13 bankruptcy filings - from preparing the payment plan to protecting you from malicious creditors, we will be by your side every step of the way. Schedule your free consultation today by visiting www.zoclaw.com.