If you are considering personal bankruptcy and are wondering whether Chapter 13 bankruptcy is the right option for you, it is important to understand how this type of bankruptcy works. You should also gain a better understanding of the benefits and limitations of Chapter 13 bankruptcy under the U.S. Bankruptcy Code. Whether you have initial questions about bankruptcy or you are planning to file, you should always seek advice and representation from an experienced Ohio bankruptcy lawyer. In the meantime, here are five things you should know about Chapter 13 bankruptcy.
- A Chapter 13 Petition Adjusts Debts
Chapter 13 is a type of personal bankruptcy that adjusts the amount of debts. Instead of liquidating all of a debtor’s assets in order for a debtor to receive a bankruptcy discharge (as is done in a Chapter 7 bankruptcy case), the debtor develops a reorganization plan that requires payments over a relatively lengthy period of time. If the debtor successfully completes the terms of the repayment plan, at the end of the terms of the plan, any remaining debts can be discharged.
In business bankruptcies, Chapter 11 is a similar type of reorganization bankruptcy that allows a business to develop a repayment plan and to keep its doors open while satisfying the terms of the repayment plan.
- You Must Be a Wage Earner to Be Eligible for Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also known as a wage-earner’s plan. This is because, in order to be eligible for Chapter 13 bankruptcy, you must be able to show that you earn a regular wage that will allow you to complete the terms of your repayment plan. This is because the plan will require regular payments that you can only pay if you have a regular wage.
- Debts Will Not Be Discharged for Three to Five Years
We explained that the reorganization plan associated with Chapter 13 bankruptcy lasts for a relatively lengthy period of time. The typical length of a Chapter 13 reorganization or debt repayment plan is anywhere from three to five years. Accordingly, a debtor will not be eligible for a discharge until the terms of the plan have been completed—approximately three to five years.
- You Can Avoid Foreclosure with Chapter 13 Bankruptcy
One of the great benefits of Chapter 13 bankruptcy is that it can allow you to avoid foreclosure and to remain in your home. The automatic stay associated with your bankruptcy filing will stop the bank from moving forward with any foreclosure actions, and then you can get back on track with your mortgage payments in your reorganization plan, but you’ll also need to use the plan to bring past due payments current over time.
- Debt Limits Exist for Chapter 13 Bankruptcy Eligibility
It is critical to know that your eligibility for Chapter 13 bankruptcy depends upon the amount of debt you have. If you have more than $1,257,850 in secured debts or more than $419,275 in unsecured debts, you cannot file for Chapter 13 bankruptcy. However, Chapter 11 bankruptcy may be an option, even for an individual.
Contact an Ohio Personal Bankruptcy Lawyer
If you have questions about your options for personal bankruptcy, or you need assistance determining your eligibility for Chapter 13 bankruptcy, one of our experienced Ohio bankruptcy attorneys can assist you. Contact Dworken & Bernstein for more information about the services we provide to clients in Lake County and Cuyahoga County.