If you’re struggling to pay off a mountain of debt, but still have a relatively steady income, Chapter 13 bankruptcy might offer the cure for your financial ills. Chapter 13 bankruptcy, often called the “wage earner’s plan,” allows filers to consolidate their debt into a single repayment plan. It also assigns a trustee to deal with creditors so filers can focus on solving their debt troubles without constant harassment.
Chapter 13 Eligibility:
In order to file for Chapter 13, petitioners must have some sort of income. This often takes the form of wages, but could also include Social Security benefits or pension payments. Many Chapter 13 filers have some financial means, but were recently surprised by a financial emergency, like a home foreclosure, a severe illness, or a sudden job loss. Of course, if your income falls below the median income in your state, you may be eligible to file for Chapter 7 bankruptcy. But if you don’t qualify for Chapter 7, Chapter 13 could be your best option.
How Chapter 13 Works:
When you file for Chapter 13 bankruptcy, you’ll give the court a list of your income, assets, and debts. The court will use this information to help you create a streamlined payment plan. The bankruptcy court will allow you to keep a certain amount of money for basic expenses, such as food and housing, and the rest of your disposable income will be used to repay debts. The process typically lasts three to five years, and at the end of the payment period, if the debtor has made consistent contributions, the court may forgive the remaining debt.
Stop Home Foreclosure in Chapter 13:
While Chapter 13 has a strong effect on common debts like medical and credit card bills, many filers use Chapter 13 as a tool to stop home foreclosure. If a lender is threatening to foreclose on your home, filing for Chapter 13 triggers the automatic stay, which immediately halts any foreclosure proceeding. After the foreclosure is stalled, filers have three to five years to make steady payments on their mortgage. Often, homeowners are able to catch up on their mortgage payments and save their homes from the grasp of aggressive creditors.
Contact a Chapter 13 Bankruptcy Attorney:
Even though Chapter 13 has had a profoundly positive effect on the financial health of millions of Americans, it may not be for everyone. To determine whether this unique form of debt relief is right for you, contact a local Chapter 13 bankruptcy today for a free consultation.