Chapter 13 Bankruptcy
Is most commonly known as the "wage earner plan." The slate is not wiped clean, but instead your debt is restructured so that you can pay off your debts in about five years. Each person has their own set of unique financial circumstances, therefore the outcome in court will vary. It is best to have an experienced bankruptcy attorney assisting you with this process.
Filing for bankruptcy can be complicated. There are numerous laws and qualifications an individual must meet. Your specific financial state will require contacting my bankruptcy law offices as the first step towards getting a full evaluation of your finances. This will enable you to gain the knowledge you need to understand all of your options under a Chapter 13 bankruptcy.
Those that earn a regular income can file for a Chapter 13 bankruptcy because it will allow them to pay off a large part of their debt over time. However, there are debt restrictions for filing for a Chapter 13 bankruptcy. The court will determine what debts you owe, set the amount for repayment and establish your repayment plan. Nevertheless, certain kinds of debt cannot be discharged, such as some taxes, fines and restitution, most student loans and domestic support obligations.
Under Chapter 13, the debtor proposes a plan to the court to pay his creditors over a 3-to-5 year period. The plan must begin within thirty to forty-five days after the case has started and will lay out the amounts and payment schedule. Creditors are not allowed to seek payment during this time unless it is through the court. Under the plan, the debtor gets to keep his property and the creditors receive their payments minus the interest that would have been accruing but for being in the bankruptcy plan.
The achievement of a Chapter 13 bankruptcy truly depends on how good the plan is. For a Chapter 13 plan to take effect, it must meet a myriad of conditions. Those conditions are laid out in Section 1325 of the Bankruptcy Code and are comprised of the following: unsecured creditors will receive a minimum through the chapter 13 plan as they would in a chapter 7 liquidation and recompense all creditors in full, or assign all of the debtor's disposable earnings to the Chapter 13 plan for a period of at least three years (or five years for a debtor who makes more than the median income).
Businesses cannot file for a Chapter 13 bankruptcy. Self-employed individuals who run a business or conduct business in their own name can file for bankruptcy under this Chapter—but it must be filed in their name and not the name of the company. There are limitations on how much unsecured debt you may have in order to be permitted to file under this chapter.
A business can meet the requirements of a Chapter 13 bankruptcy if the individual can show that he has enough income left over after living expenses to repay unsecured debts. The bankruptcy plan must be comprised of an approach to repay some types of debts in full. In addition, the plan must cover all debts (both secured and unsecured) and the plan for repayment. There are three categories in a business bankruptcy under Chapter 13:
- Mortgage and secured debts must be paid in full or the house/asset will be sold by the lender.
- Alimony, child support, tax debts, wages, commissions and benefits to employees, contributions owed to employees' benefit funds are categorized as priority debts. These must be repaid in full.
- Every other unsecured debt has to be repaid anywhere between 0% and 100%. The percentage depends on disposable income (income, less priority and secured debts), the market value of nonexempt assets, and the length of the bankruptcy plan.
The Chapter 13 bankruptcy plan will not be approved by the court unless the individual's income is sufficient to cover the payments under the plan. Individuals are permitted to use the following sources of income to repay their business obligations: Salary/Wages, income from commissions from freelance or seasonal jobs, pension, benefits from Social Security, workers compensation benefits, welfare benefits, rental income, asset sales, alimony or child support, or spousal income.
One of the last qualifications of a Chapter 13 bankruptcy is proof that the individual has filed a tax return for state and federal up through the bankruptcy year. One must submit verification of the previous 4 years' filings. Chapter 13 business bankruptcy is quite complex and the slightest hitch can invalidate the whole process. It's best to work with a bankruptcy lawyer for any bankruptcy, including Chapter 13 bankruptcy.