Chapter 13 bankruptcy is also known as “wage earners’ bankruptcy.” It is for people who are earning money but have fallen behind while desperately trying to keep up with payments for things that they bought on credit. In this case, your debts are organized and a program is set up to pay them. As long as you adhere to the terms of the payment plan that the bankruptcy court establishes, you can keep your house and your other assets after filing for bankruptcy.
Under Chapter 13 bankruptcy law, you are given 3–5 years to resolve debts while applying all your disposable income to debt reduction. This means living with no frills, but the chapter 13 option lets you get rid of unsecured debt like credit card payments while you catch up with your mortgage payments. A court-appointed trustee will supervise you by collecting and distributing payments.
How Chapter 13 Works
First, you must submit a reorganization plan that safeguards your assets, such as your house and cars, against foreclosure and repossession and request forgiveness of all the debts.
No bankruptcy filing eliminates all debts, whether it’s chapter 13 or the more extreme chapter 7. Alimony and child support are dischargeable, this also includes student loans and most taxes.
Once you file a Chapter 13 bankruptcy petition, it will suspend some pending foreclosures and payments of any other debts that you may be owing. This will give you relief from unsecured creditors while the court comes up with a plan, but it will not completely eliminate the debt. The main point of the bankruptcy plan is to free up your income so that you can make regular mortgage payments and keep your assets.
Chapter 13 bankruptcy buys you enough time to get your finances together. It helps by extending the amount of time you are given to repay the money you owe after the bankruptcy court issues its ruling.
The Process Of Opening A Chapter 13 Bankruptcy Case
- First, you have to analyze your debts and determine if this is the right action for you. When you are sure, you can then hire a bankruptcy attorney and file for bankruptcy.
- The court will appoint a bankruptcy trustee to oversee the whole case; once the trustee has been identified, a notice of appointment signed by the bankruptcy judge will be sent to you. You will be asked to provide a credit report and state your regular income to the court so it can make a payment plan for you.
- Since you will file for federal bankruptcy code Chapter 13, you have to make sure that you file a certificate of credit counseling, a copy of any debt payment that was made in the past, proof of payment from employers, and your regular income and expenditures.
- If you have any anticipated increases in income, you must list those as well. The court will expect you to be very open about all your income.
Top Reasons People File For Bankruptcy
There are several reasons why people file for bankruptcy; below we have listed the top 4 reasons in detail:
Falling behind with mortgage payments
When people fall behind with mortgage payments, they run the risk of losing their properties or homes through foreclosure by the lender. An automatic stay is invoked once a person files for chapter 13 bankruptcy; this stops the lender from carrying out foreclosure or collecting past-due payments.
Based on the person’s income, the money that they are supposed to pay is spread out over the course of the payment plan decided by the court in monthly payments. This allows the person to remain in their home and still have enough disposable income.
When behind on car payments and in danger of repossession.
Falling behind on car loan payments is another reason why people may file for bankruptcy. The person may be at risk of having the car repossessed by the lender. The automatic stay, which takes effect after filing Chapter 13, will prevent the lender from also collecting the past due amounts.
The bankruptcy filer will continue to make regular monthly car payments while paying a small amount off the past due amount. They have to follow the debt repayment plan provided by the court.
When owing taxes from the past few years.
People who fall behind in paying taxes, including income tax, can also file for bankruptcy. The court may decide which of the past due debts has priority over the non-priority ones. Priority taxes will be paid in full during the plan of payment. Non-priority taxes will be lumped in with other unsecured and secured debts.
Lawsuits, bank freezes, and wage garnishments
Some people struggle with debt for years, to the point of filing for bankruptcy. Creditors will do anything in their power to collect what is owed to them.
At some point, they may file a lawsuit and get a judgment against the debtor; after that, the creditor may be granted permission to put a freeze on their accounts to take their money.
Filing for Chapter 13 Bankruptcy in Media, PA? Work With Us Today!
Michael Alan Siddons has years of experience in similar cases and can represent you in whatever situation you may find yourself in.
If you have any questions about Chapter 13 bankruptcy or you’re considering filing for Chapter 13 bankruptcy in Media, PA, contact us today at 610-255-7500.
