3 things most people don’t know about chapter 13 bankruptcy
TRANSCRIPT
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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.