Post-Bankruptcy Life is Good
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Chapter 13 is meant for individuals who have a steady job, but significant debts. Filing for Chapter 13 allows individuals with regular income to pay part of their debts in installments over a three to five year period. It can also be an option for those who do not qualify for a Chapter 7 bankruptcy.
Chapter 13 is only available for individuals, so corporations and partnerships are unfortunately not eligible. There is one exception; however, self-employed individuals and those operating an unincorporated business are also allowed to file for Chapter 13.
If you are interested in Chapter 13, note that there are debt limits in the U.S. Bankruptcy Code– unfortunately you may not qualify if you owe too many obligations to creditors.
Under Chapter 13, you must file a plan with the court to repay your creditors all or part of the money that you owe them using your future earnings. These earnings can be wages from employment, self-employment income, Social Security and disability benefits, interest income, pension income and any other source that provides you with a steady income stream. The length of time you have to repay your debts ― from 36 to 60 months ― depends upon your projected income and other factors. Ultimately, the court must approve your plan before it can take effect.
The advantage of declaring Chapter 13 bankruptcy is that the debtor is able to force creditors (in a successful plan) to accept your terms. These terms may afford you relief from losing your home, risking an IRS or state taxing agency levy, wage garnishments, liens and other methods utilized by creditors to collect on debts. After completing the payments under your plan, all of your debts will be discharged (wiped out) except non-dischargeable debts, such as debts for domestic support obligations, most student loans and certain taxes.
If you decide to file for Chapter 13 bankruptcy, your bankruptcy lawyer will work with you to draft a repayment plan, which will be submitted to the New Jersey Bankruptcy Court. After it is file the plan, a bankruptcy trustee holds a creditor meeting to address creditor claims and your financial status.
The court then holds a confirmation hearing to determine whether the proposed repayment plan is acceptable or if changes need to be made.
Once your payment plan period begins, creditors are bound by the terms of the plan.
With the increase in home values, we are increasingly using Chapter 13 to keep clients’ homes. Your home may have equity beyond the $75,000 homestead exemption or $105,000 homestead exemption for seniors and disabled persons. A Chapter 13 bankruptcy can often be used to keep your house when your equity exceeds the homestead exemption amounts.
At South Jersey Bankruptcy, you will be offered non-judgmental advice and work to make your bankruptcy proceedings as understandable and stress-free as possible. For more information about your options under bankruptcy law, contact us for a free initial consultation.
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