Chapter 13 Bankruptcy: A Guide for Consumers
What Is Chapter 13?
Chapter 13 bankruptcy, also known as a wage earner’s plan, provides a structured path for individuals with regular income to manage their debts. Unlike Chapter 7, which involves liquidation, Chapter 13 allows debtors to reorganize their financial obligations and create a repayment plan over a period of three to five years.
Key Aspects of Chapter 13:
- Debt Adjustment: Chapter 13 enables debtors to retain their property while repaying debts gradually. The repayment plan is proposed by the debtor and approved by the court. During this time, creditors are prohibited from pursuing collection efforts.
- Advantages:
- Foreclosure Prevention: Chapter 13 offers a lifeline to homeowners facing foreclosure. Debtors can halt foreclosure proceedings and catch up on delinquent mortgage payments over time.
- Secured Debt Rescheduling: Debtors can extend secured debts (except for primary residence mortgages) over the plan’s duration, potentially reducing monthly payments.
- Co-Signer Protection: A special provision safeguards third parties liable for “consumer debts,” such as co-signers.
- Consolidation Loan Effect: Debtors make plan payments to a trustee, who then distributes funds to creditors. Direct contact with creditors is avoided during Chapter 13 protection.
- Eligibility:
- Any individual, including self-employed or unincorporated business owners, can seek Chapter 13 relief if their combined secured and unsecured debts are below $2,750,000 at the time of filing.
- A prior bankruptcy petition dismissed due to willful non-compliance or voluntary dismissal after creditor intervention within the preceding 180 days disqualifies an individual from filing under Chapter 13.
Conclusion
Chapter 13 bankruptcy provides a lifeline for wage earners struggling with debt. By creating a manageable repayment plan, debtors can regain control of their financial future. If you’re considering bankruptcy, call Charles Fitzpatrick at (330) 552-7770 to explore your options and determine the best path forward.
Take Action Today: Don’t let debt hold you back. Reach out to Charles Fitzpatrick at Charles@FitzpatrickEsq.com or call (330) 552-7770 to schedule your free consultation. Let’s pave the way toward financial freedom together!
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Consult a bankruptcy attorney for personalized guidance.