When you have more personal debt than you can realistically hope to manage, you might consider filing for bankruptcy to have your debt discharged. There are numerous types of bankruptcy, which are known as chapters. For individuals struggling with personal debt, including credit card and medical bill debt, the two available bankruptcy chapters are Chapter 7 and Chapter 13.
Bankruptcy is not a process to be taken lightly. It is not a quick fix for your debt problem. Instead, it is a substantial lifestyle change that will force you to handle your money differently. This will hopefully prevent you from having to file again and give you the fresh start you need to regain control of your life and finances.
Who Qualifies for Chapter 13 Bankruptcy?
Individuals who demonstrate that they have a sufficient level of disposable income to repay some of the debt through a repayment plan qualify for Chapter 13 bankruptcy. Businesses do not qualify for Chapter 13 bankruptcy, though there are certain circumstances under which a small-business owner can file Chapter 13 bankruptcy as an individual. The income may come from your job, your investments, Social Security or welfare benefits, passive income, spousal maintenance, or pension payments. The amount of disposable income you have is determined by subtracting your monthly expenses, such as mortgage and car loan payments, from your monthly income.
Individuals who have secured debts exceeding $1,184,200 or unsecured debts exceeding $394,725 do not qualify for Chapter 13 bankruptcy. Individuals must have proof that they paid their federal and state income taxes for the previous four years as well. Individuals who do not qualify for Chapter 13 bankruptcy should consider filing for Chapter 7.
The Chapter 13 Bankruptcy Process
For you to move forward with the Chapter 13 bankruptcy process, the court must approve your bankruptcy plan. If it approves your plan, you are assigned to a bankruptcy trustee. This individual oversees your debt repayment and acts as a liaison between you and the court.
Chapter 13 repayment plans typically last three to five years. During repayment, the filer makes monthly payments to his or her bankruptcy trustee. The trustee then uses the money to repay a portion of the filer’s debts. Priority and secured debts—which include tax debts, spousal maintenance, and child support debts as well as wages owed to employees—must be repaid in full. Unsecured debts do not always have to be repaid in full. Rather, the amount of money the filer must repay these creditors is determined by the length of the repayment plan, the amount of disposable income he or she has, and the value of his or her nonexempt property.
Work with an Experienced Chapter 13 Bankruptcy Attorney
If you are considering filing for Chapter 13 bankruptcy or any other chapter of bankruptcy, speak with an experienced bankruptcy lawyer before you file your claim with the court. An attorney in Denver can help you determine which type of bankruptcy is ideal for your case and explain its process to you in greater detail so you fully understand what you are getting yourself into. Your lawyer can also provide you with legal advice and guidance as you negotiate your claim with the court and work through the bankruptcy process.