Claiming bankruptcy is a big step and one that will follow you for up to 10 years depending on the type of bankruptcy protection you seek. That being said, filing a bankruptcy claim is also one of the most effective ways to eliminate large portions of debt over a relatively quick period of time. Although bankruptcy can bring with it a host of consequences that are difficult to ignore, it’s often the only way out for troubled debtors who have exhausted traditional debt relief options. To see if bankruptcy is the right option for you, consider taking our free bankruptcy evaluation.
Of course, before a claim can be filed the debtor must first choose between the two major types of bankruptcy – Chapter 7 and Chapter 13. For your convenience we’ve compiled information on both types, which you can find by navigating to the following links: Chapter 7 Bankruptcy Information and Chapter 13 Bankruptcy Information. Rather than delve into the specifics of filing bankruptcy, the following article will cover Chapter 13 bankruptcy rules and will also delve into some of the more commonly asked questions about this type of bankruptcy protection.
Also known as “reorganization bankruptcy,” Chapter 13 is designed to allow wage earners to repay their debts through a structured repayment plan, which typically spans 3-5 years. While there are several advantages to filing under Chapter 13, perhaps the most significant advantage is that individuals are allowed to retain their valuable assets. As you might know, Chapter 7 places such assets at risk by liquidating them to pay back creditors. However, this is not the case when filing under Chapter 13.
Chapter 13 Bankruptcy Rules
When it comes to Chapter 13 bankruptcy rules, there are only a few minor stipulations –
• Any individual debtor may file under Chapter 13, though their unsecured debts must be less than $360,475 and secured debts less than $1,081,400.
• Chapter 13 does not apply to a corporation or partnership
• An individual cannot file if, during the preceding 180 days, they have had a bankruptcy petition dismissed due to failed court appearances or the unwillingness to follow court procedure.
• Any individual who wishes to file under Chapter 13 must complete court mandated credit counseling within 180 days of filing.
In addition to the rules mentioned above, there are also some procedural rules to consider. For instance, a debtor is permitted to keep their home during Chapter 13, though they must continue to make on-time payments. Also, once the bankruptcy court confirms the planned repayment, the debtor must make the plan work. Payment can be made either directly or through payroll deduction. If the debtor fails to make payments per their agreement, their case can be converted to Chapter 7, which means that their assets could face liquidation.
For more information about filing bankruptcy, consider consulting with an experienced and reputable attorney or bankruptcy service company. You can also learn more by checking out our guides on how to claim bankruptcy and how to go bankrupt responsibly.