Eligibity for Chapter 13 bankruptcy is based upon your income. If you may make more money per month than you spend on your reasonable living expenses but have more debt than you can comfortably handle, then Chapter 13 bankruptcy may be the best solution. This is because a Chapter 13 bankruptcy plan does not have to pay debts in full; it can provide for only fractional payment. How much the plan has to pay to creditors is a function of the confirmation tests which is best explained by your attorney after review of your assets, liabilities and your monthly budget. At the end of the plan, it discharges any unpaid balance of dischargeable debts.
There are a few other criteria that must be met for filing a Chapter 13 Bankruptcy; your attorney will be the best person to introduce you to these!
While debtors are allowed to keep all of their property, the court approves a new interest-free plan for repayment. A written plan is created giving details of all the transactions that will occur, and the duration of the same. The repayment must begin within thirty days after the case has started. The transitory stage of paying a trustee who then pays a creditor, as in Chapter 7 Bankruptcy is usually eliminated with Chapter 13 Bankruptcy. Although, in some cases people may involve a trustee who would take care of disbursing money to the creditors as per the plan. Also, as per the law the creditors must strictly adhere the repayment plan approved by the court and are in fact prohibited to collect any claims from the debtor. Your attorney will prepare new repayment plan to best suit your situation.
The one advantage of Chapter 13 over Chapter 7 Bankruptcy is the full discharge option which is not applicable under Chapter 7 filing. For example, if a debtor manages to complete all necessary payments in the plan, he/she is given a full plan discharge. (There are a few exceptions to this case, which your attorney will guide you about if necessary.) Yet another advantage of the Chapter 13 filing is that a repayment can be created even if creditors disagree with it, as long as it is approved by the Court. Although, in all fairness the court allows creditors also to file an objection, in case they may have any.
Yet another advantage of the Chapter 13 bankruptcy filing is that a repayment can be approved even if creditors disagree with it. The Court will approve your Chapter 13 bankruptcy plan as long as it meets the confirmation tests.
A Chapter 13 bankruptcy is often the best option for people who
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have fallen behind on payments and want to save a home or car.
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owe debts not dischargeable in Chapter 7 (such as taxes, child support, marital property settlements)
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they have liens that are larger than the value of the assets securing the debt
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their assets are worth more than the available exemptions
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they are repaying retirement fund loans not permitted in Chapter 7
Let's just say our attorneys will ensure that you don't need to bog yourself down by trying to understand the complicated details of this answer. Essentially, the filing for Chapter 13 Bankruptcy entails the following.
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Determine whether Chapter 13 is the best solution for you.
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Prepare a budget.
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Examine individual cases to figure out whether require filing of Chapter 13 bankruptcy, or can be tackled in some other way.
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Determine and implement methods of dealing with secured creditors.
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Devise a chapter 13 plan, and fill out the forms
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Pay the filing fee and complete the process of filing the forms and pleadings