A Brief Run-through: Is Chapter 13 the Best Choice?

Filing bankruptcy is an important decision you need to think through. In a Chapter 13 bankruptcy, you are given the chance to restructure your overwhelming debts to bring current your payments for secured loans, or loans with collateral that could be a home, a car, or similar properties. During your repayment period of three or up to five years, you are protected by the federal court. Avoiding foreclosures is a common concern, but know that bankruptcy laws are more complicated than that. Certain requirements must be met before you can declare bankruptcy. A Chapter 13, for example, is dubbed as wage earners bankruptcy due to the regular income requirement.

Before knowing if filing for bankruptcy under Chapter 13 is the best choice for you, it might be helpful to first check if you qualify. For you to be able to file for bankruptcy Chapter 13, the following requirements must be met:

  • There must be regular income
  • The total unsecured debt must be below $394,725
  • The total secured debt must be below $1,184,200
  • Tax filings are regular and brought current
  • No Chapter 13 has been filed in the last two years
  • No Chapter 7 has been filed in the last four years
  • In the last 180 days, no bankruptcy petition has been filed and dismissed because of failure to appear or comply with orders from the court

filing chapter 13 bankruptcyIf these are not met, there are debt relief options aside from declaring bankruptcy under Chapter 13. If you qualify for the bankruptcy filing, however, you may do the following steps:

  1. Anyone considering bankruptcy would benefit from meeting with a professional from a bankruptcy law-firm and a credit counselor for initial consultations when finances and debt reorganization plans are discussed. Bankruptcy attorneys will help document your eligibility to a bankruptcy trustee, who will then administer proceedings. The goal is to acquire court approval to repay secured and unsecured debts while retaining your assets or even have certain debts forgiven.
  2. Work on your repayment plan with your bankruptcy attorney. Fill out the forms and paperwork that you are required to file. Formally submit your bankruptcy petition to be able to benefit from the automatic stay and prevent lenders from attempting to collect or even contact you.
  3. Submit your proposed payment plan 14 days after filing the petition and work on making payments within 30 days from filing, even if the plan has not yet been approved by the bankruptcy court.
  4. Go through the scheduled meeting with creditors and subsequent confirmation hearing, where your payment plan is confirmed. Before the completion of the bankruptcy, a debtor education course is often required.

The different types of bankruptcy have advantages and disadvantages. A Chapter 13 filing is longer than common forms of consumer bankruptcy, such as Chapter 7, which covers debts that include credit cards, personal loans, and medical bills, among others. However, in certain cases, it may still be the best option. Also, although your Chapter 13 bankruptcy will be on credit reports seven years from filing, credit scores will still eventually improve. It is harder to find credit while you’re bankrupt, but there are various ways of getting a fresh start at life.

Getting a bankruptcy lawyer would help you get familiar with personal bankruptcy and the bankruptcy process. To know if bankruptcy Chapter 13 is the best choice for you, ask yourself the following:

  • Do you want to keep specific assets? Are you behind on your car payments or mortgage and wish to make these current?
  • Do my debts include child support, student loans, or recent taxes that most likely cannot be discharged by Chapter 7 or bankruptcy in general, but paying-off what is owed from other lender types would help wipe-off these debts?
  • Do I have a co-signer on any account in arrears? Do I want to have my co-signer protected while I pay off what I owe and clear the co-signed debt?

Do you need help from a bankruptcy lawyer?

Debt relief will help you move forward. If you want to know how to file properly or if you have questions on filing bankruptcy in Michigan, contact Farmer & Wright now for a consultation. Our experienced bankruptcy attorneys are more than ready to help you out.

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