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3 Things Most People Don’t Know About Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a subject of confusion for many people. There is

much to know about Chapter 13 bankruptcy before deciding whether or not

to file for it. An important thing to remember is that filing for Chapter 13 is

neither inherently good nor bad—it all depends on your specific situation.

Learn more by reading up on these three facts you may not know about

Chapter 13 bankruptcy.

#1: Chapter 13 bankruptcy is significantly different than Chapter 7

bankruptcy.

With Chapter 7 bankruptcy, you can

request that a court discharge your

debts for you, and in return, the court

can sell a portion of your property order

to pay your debts. The Chapter 7

process includes one visit to the

courthouse, takes about four to six

months, and costs about $300. While

Chapter 7 bankruptcy is more common,

less expensive, and a less lengthy process, Chapter 13 bankruptcy does not

involve liquidation—you can keep your property, because you are repaying

your debts through your income, not your home, car, and other assets. In

addition, to file Chapter 13, you must receive credit counseling from an

approved agency.

#2: Not everyone is eligible for Chapter 13 bankruptcy.

When you file for Chapter 13, you are expected to pay some or all of your

debts in three to five years. In order to be eligible for Chapter 13

bankruptcy, you must prove to the court that you are able to make your

payments regularly—therefore, low- or no-income people may not have the

option of Chapter 13 bankruptcy. Even if you have a regular income, if your

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debts are too high, a court may not allow you to file for Chapter 13

bankruptcy. Chapter 13 also demands that you must pay certain debts in

full, or you will not be allowed to proceed.

#3: Your income helps determines how lengthy the Chapter 13

process is.

If your income from the six months prior to filing Chapter 13 is higher than

the median income for your state, you’ll likely be put into the five-year plan.

However, if your income is lower than the median, you are eligible for the

three-year plan. In addition, the amount you owe is also a determining

factor. After you’ve completed your plan, your eligible remaining debts are

wiped out—that is, after you complete a required budget counseling course.

For more information and to ask questions contact Lewis Adams and

Associates.