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Chapter 13 Bankruptcy FAQ

Many Americans struggle every day to repay their debt. While this is not a desirable situation for anyone to be in, there are some ways to refinance your debt to help make life more manageable. Chapter 13 bankruptcy is one such option that may be right for certain individuals. If you are considering declaring bankruptcy, here are some frequently asked questions about Chapter 13 bankruptcy.

How is Chapter 13 bankruptcy different from others?

Chapter 13 is a unique form of bankruptcy because it allows the debtors to keep their assets, while other types may ask you to relinquish property to your creditors. Instead, Chapter 13 allows debtors to pay off their debts over a period of time, so it is only suitable for individuals with a steady income. Because your debt is still being paid and not dissolved, Chapter 13 is often referred to as reorganization bankruptcy.

Who is eligible to file?

Only individual debtors or married couples filing jointly are able to file under Chapter 13. This means business entities are not eligible, though an individual may file for bankruptcy for the portion of a company's debt they are personally liable for. The individual must also be a tax paying citizen with a steady income.

You also are not eligible if you have filed for bankruptcy within the last few years, or have had a previous bankruptcy case dismissed in the last 180 days. Your debt also may not exceed $336,900 in unsecured debt and $1,010,650 in secured debt.

How does the process work?

Before filing, you must complete a credit counseling course approved by the United States Trustee's office. After this, you will need to fill out a petition to whatever bankruptcy court serves your area of residence, which requires paying a $235 filing fee and a $75 administrative fee.

Along with this petition, a payment plan must also be submitted to the court for approval. Within 45 days, the court will appoint a judge to decide whether or not the payment plan is feasible. If your plan is denied, then you will be able to submit a modified plan. After your plan is approved, you may start repaying your creditor.

What do I have to repay?

Repayment under Chapter 13 is generally made in monthly payments over the course of 3 to 5 years. These payments will vary depending on the amount of debt you're in, but there are somethings that you have to pay back in full within this time frame. These include: back alimony and child support, tax debt, mortgage defaults, money owed to employees, and other secured debts. Unsecured debts may not need to be paid back, or may be paid back partially depending on the individual's case.

If you are considering filing Chapter 13 bankruptcy but need some guidance, contact a bankruptcy lawyer (such as John G Rhyne Attorney At Law) for professional help.