Bankruptcy filed under Chapter 13 gives people a range of advantages over liquidation under a bankruptcy filed under Chapter 7. Maybe most significantly, chapter 13 provides folks a way to preserve their homes from foreclosure. By filing under this chapter, individuals can halt foreclosure proceedings and may remedy past due mortgage payments over time.
Nevertheless, they will have to still make all mortgage payments that come due during the Chapter 13 plan by the due date. Yet another advantage of chapter 13 is that it allows people to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments.
Chapter 13 bankruptcy also has a specific provision that protects third parties who are responsible to the debtor on “consumer debts.” This provision might shield co-signers. Finally, bankruptcy filed under chapter 13 acts like a consolidation loan under which the person makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chap 13 protection.
Virtually any person, even if self-employed or operating an unincorporated business, is qualified for bankruptcy filed under chapter 13 as long as the individual’s unsecured debts are less than $360,475 and secured debts are less than $1,081,400. These amounts are altered regularly to reflect changes in the consumer price index. A corporation or partnership may not be a bankruptcy filed under chapter 13 debtor.
Individuals cannot file under bankruptcy filed under chapter 13 or any other chapter if, during the former 180 days, a previous bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover assets upon which they hold liens. In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days prior to filing, received credit counseling from an accepted credit counseling agency either in an individual or group briefing. There are exceptions in emergency circumstances or where the U.S. trustee (or bankruptcy administrator) has identified that there are inadequate permitted agencies to provide the needed counseling. If a debt management plan is created in the course of required credit counseling, it will have to be filed with the court.
If you’re considering bankruptcy, talk to a local bankruptcy attorney about your options. An experienced debt attorney can provide you with which options are right for you.