If you have large amounts of debt that you are struggling to pay, you probably are wondering what your options are. You may be considering bankruptcy but do not want to lose all of your assets.
One option is Chapter 13 bankruptcy. To file, you must meet certain eligibility requirements, but it has certain advantages over Chapter 7 if you are able to meet the repayment plan requirements.
The United States Courts discusses that one of the biggest eligibility requirements is that you have a regular income. This means that only wage earners, sole proprietors and self-employed individuals are eligible to file Chapter 13. Another requirement is that the individual is up to date with all required tax returns. There are also limits as to how much unsecured and secured debt the person may have.
How it works
Under Chapter 13 bankruptcy, the debtor must submit to the court a list of all creditors and the amounts of debt from each one, details about the debtor’s income, a list of all property and a list of all monthly expenses.
The debtor must supply the court with a repayment plan that includes biweekly or monthly fixed payments. If approved, the debtor pays these amounts to a court trustee, and this individual pays the creditors. During the bankruptcy term, the creditors must not contact the debtor to collect payments.
According to the Internal Revenue Service, the debtor can continue to receive tax refunds during the bankruptcy term. However, the IRS may use the amount to pay off any tax debts.
If the debtor makes all the required payments of the repayment plan, the court discharges the majority of the debt. However, some debts, such as a mortgage, are not eligible for discharge, and the individual must continue to pay them.