For those flooded with debt, the question may not be whether to file bankruptcy, but rather what type of bankruptcy is best given individual circumstances. Depending upon the existing income, assets and financial obligations of the debtor, Chapter 13 may be the more advantageous choice.
Chapter 13 is a repayment plan in which the debtor makes payments to a trustee who then distributes payment to creditors based on the bankruptcy plan. Immediately upon filing a Chapter 13 bankruptcy, the court will issue an "automatic stay" which will stop foreclosure proceedings and other collection actions.
Along with the home, other secured debt such as auto loans can be renegotiated and paid off over the life of the bankruptcy plan, which may lower payments. Unlike Chapter 7 bankruptcy, property does not need to be liquidated in order to pay off creditors; the home, car and personal possessions of the filer remains his or her property.
Any individual can file Chapter 13 if his or her unsecured debts are less than $360,475 and secured debts are less than $1,081,400. The debtor must also have received credit counseling from an approved credit counseling agency in the last 180 days before filing the petition. Additionally, if the debtor has had a bankruptcy petition dismissed during the previous 180 days for "willful failure to appear before the court or comply with orders of the court" or was voluntarily dismissed because the creditors pursued the property in which they hold liens, the debtor may not file Chapter 13.
To complete the petition, the person filing must provide a list of all creditors, amounts owed and the type of claim against the debtor. The court will also require information pertaining to the debtor's income, a list of the individual's property and a detailed list of monthly expenses.
If the debtor is married, regardless of whether the couple is filing joint or separate petitions, or even if only one of them is filing a bankruptcy petition, the filer must obtain all of the information pertaining to the spouse. If only one spouse is filing bankruptcy, the court will look to any recent gifts or transfers to the non-filing spouse to ensure no assets are being hidden from the divorce proceedings.
Contact a Bankruptcy Attorney
Only a discussion with an experienced bankruptcy attorney will provide you with enough information to determine whether Chapter 13 bankruptcy is right for you. If you are contemplating bankruptcy or facing a high debt load, contact a knowledgeable lawyer right away.