When you are struggling to make your credit card payments, mortgage, car payment, or other outstanding bills, you may find yourself deep in debt. At a certain point it may feel that you are so far behind that you are never going to catch up. Fortunately, United States law offers provisions to debtors who are under severe financial stress to help them secure a fresh start. While bankruptcy has its downsides, it can be a much better alternative to being burdened with a large pile of debt for the rest of your life. Individuals who are looking to file for bankruptcy have multiple bankruptcy options available, each of which is ideal for different people in different situations.
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What is Chapter 13 Bankruptcy?
One bankruptcy option that is available to an individual with a high amount of personal debt is Chapter 13 Bankruptcy. Under Chapter 13, an individual clears his or her debts by drafting a plan to save money and pay back the debts over 3 to 5 years. This gives the debtor a large grace period to reevaluate finances and gradually work towards becoming debt free. For some people, this form of bankruptcy is a much preferred method over Chapter 7, which requires a debtor to liquidate, or sell, much of his or her property to pay back debts. With Chapter 13, you will liquidate little to no property and will pay back debts using income that you earn over time.
Eligibility: Debt Limits
In order to file for Chapter 13, you must meet certain strict debt limits. Anyone with debts over the amounts listed below will not be eligible for Chapter 13 and must file for Chapter 7 instead. The restrictions on debt are divided into secured and unsecured debt as follows:
Must have less than $336,900 in unsecured debts Must have less than $1,010,650 in secured debts Must be an individual debtor. No partnerships or corporations are eligible for Chapter 13.
Eligibility: Sufficient Income
Because debts under Chapter 13 bankruptcy are paid back with saved income, an individual who wishes to file for this form of bankruptcy must have sufficient income to do so. The debtor must have a reliable source of income that is expected to continue until all debts have been repaid. Also, the income must be large enough that necessary expenses are covered while still having disposable income left over that can be used to pay back outstanding debts. Without a reliable or sufficient income, a debtor cannot realistically keep his or her promise to have all debts paid back in 3 to 5 years. Those with low or unreliable income may be required to file under Chapter 7 instead.
If you meet the above eligibility requirements, Chapter 13 may be an ideal bankruptcy option available to you. Consider scheduling a consultation with a bankruptcy lawyer to discuss the specifics of your situation. A bankruptcy attorney will guide you through the filing process and help you create a sound repayment plan that you can realistically complete over the next 3 to 5 years. While you may have to make some financial sacrifices now, the short term losses will be largely outweighed by the huge gains of finally escaping the stranglehold of personal debt.
For More Information
To learn more about filing for Chapter 13 bankruptcy and how you can take steps now to secure a more secure financial future, please visit the website of the New Orleans bankruptcy attorneys of Kervin & Young, LLC today.
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