Bankruptcy & Creditors' Rights
Chapter 13 is often referred to as "Wage Earner" or "Reorganization" bankruptcy. Consumers who don't qualify for a chapter 7 filing based on an income that is too high are usually able to qualify for a chapter 13. This type of bankruptcy is reserved for consumers filing on an individual basis to seek relief from personal debt. This means business entities, even a sole proprietorship, are not permitted to file chapter 13 petitions in the name of the business. If you are an individual who owns a business or has business interests, you can file for chapter 13 on a personal basis and can include any business related debts you have acquired.
To qualify for this type of bankruptcy, you must be an individual or married couple with regular income out of which the plan payments can be made. In addition to a steady and dependable income, your secured debts (homes, cars, liens, etc.) cannot exceed $1,149,525.00 and unsecured debts (credit cards,medical bills,etc.) of more than $383,175.00. These limits are adjusted every so often with the next adjustment taking place in April of 2016. Chapter 13 allows you to negotiate with creditors, formulate a new payment plan, and repay your debts over an extended period of time. This time period usually lasts between 3 to 5 years. With this type of bankruptcy, it is often possible to negotiate lower interest rates, lower fees, and be granted debt forgiveness (individual creditors may be willing to take less than originally owed). When filing for this type of bankruptcy, your attorney can be invaluable in helping you negotiate with creditors and can assist in formulating a repayment plan that is realistic for you. The debtor in a chapter 13 normally maintains possession over his or her property in contrast to a chapter 7, so if you own a home or car you may be able to keep it.
Upon filing his or her petition with the court, the debtor will submit a plan that details how they intend to pay their creditors back. The Chapter 13 payment plan must fit certain statutory guidelines and will need to be approved by the court. A discharge is usually obtained when the debtor's plan has been consummated and payments have been completed. A chapter 13 discharge may be more advantageous than a chapter 7 discharge if you own a home that has equity as you are more likely to be able to save your home.