When most people consider filing for bankruptcy, a common concern is whether they will be able to keep their property during the bankruptcy proceedings. While a Chapter 7 bankruptcy does involve selling off certain assets to cover debts, many debtors prefer to file a Chapter 13 bankruptcy because it allows them to retain ownership of their assets and property. Under a Chapter 13 bankruptcy, debtors structure a repayment plan in which they pay off their outstanding debts in monthly installments.
If you are facing overwhelming debt and having trouble paying your bills, a Chapter 13 bankruptcy may be the right solution for you. However, there are certain eligibility requirements for filing bankruptcy, and this process can be more complicated than it seems. Consulting with a bankruptcy attorney can help you determine whether you qualify for a Chapter 13 bankruptcy and help you navigate the complicated rules and regulations governing a bankruptcy case.
In a successful bankruptcy case, debts are discharged (forgiven) after you fulfill all the terms of your repayment plan, then your case is closed via bankruptcy dismissal. If your case is dismissed, this means that you no longer have an automatic stay to prohibit creditors from debt collection efforts and you will be legally liable for paying off all remaining debt. You may request a voluntary dismissal yourself, but most of the time, dismissals are involuntary and decided by the creditor.
The court will review a dismissal request by considering several factors, including the type of bankruptcy you have filed, the reason behind the request, the progress you’ve made in paying off your debt, and how a bankruptcy dismissal will impact your creditors. Bankruptcy cases can be dismissed for many reasons, such as failing to submit the proper forms, pay court fees, or attend mandatory education courses. If the court grants the dismissal request, your bankruptcy case will be closed, and you will be responsible for paying any outstanding debts that remain.
The bankruptcy court may dismiss your Chapter 13 bankruptcy case in any of the following circumstances:
In contrast with a Chapter 7 bankruptcy that liquidates your debts without requiring a maximum value, a Chapter 13 bankruptcy allows you to reorganize debts without losing your property. However, it does place strict limits on the amount of debt you can have to qualify. You must have no more than $419,275 of unsecured debt or $1,257,850 of secured debt to be eligible for a Chapter 13 bankruptcy.
Secured debts refer to debts based on collateral, in which the creditor has the right to take property back if you do not make payments. This includes mortgages and car loans, as well as debts that involve a creditor filing a lien against your property. Unsecured debts refer to debts without collateral, such as medical expenses, legal bills, utility arrears, and credit card debts.
Before your Chapter 13 bankruptcy can be approved, you must demonstrate that you have sufficient disposable income to meet your repayment plan obligations and pay back your debts in full. To determine if you have enough disposable income, you will need to calculate your total earned income and subtract certain living expenses and any payments on unsecured debts (such as mortgages and car loans) from this amount.
Earned income can be from any of the following sources:
To obtain confirmation of your bankruptcy, you must submit evidence to the bankruptcy court proving that you are eligible for a Chapter 13 bankruptcy. This includes financial documentation showing that you are employed, your debt does not exceed the required limit, you have sufficient income to repay your debt, and you have filed state and federal income tax returns for the prior four tax years.
You must fill out a specific set of official bankruptcy forms, including a petition and schedules among other required forms. After filing your case, you will be asked to submit documentation that verifies the information you provided to obtain approval for your bankruptcy, such as pay stubs, bank account statements, expense reports, and tax returns.
You must pay a court filing fee to the bankruptcy court to cover the administration of your case. It costs $310 to file a Chapter 13 bankruptcy, but you may be eligible for a fee waiver or acquire permission from the court to pay this fee in monthly installments.
When you file for bankruptcy, you are required to attend a mandatory hearing known as a Meeting of Creditors. In this hearing, you will provide proof of identification and answer questions under oath about your financial affairs or repayment plan that are posed by the trustee of your bankruptcy case or your creditors.
US bankruptcy law requires you to complete three courses and promptly submit a certificate of completion to the court following each one. Before filing your bankruptcy case, you must complete a credit counseling course from an institution that has been approved by the US Trustee’s Office. Then, you must complete a debt management course and a personal financial management course before your debts may be discharged.
A Chapter 13 bankruptcy allows you to keep exempt property, but you are required to pay back at least a portion of your debts through a repayment plan. These plans often last three to five years, and you must make all scheduled payments on time for the court to enter your discharge.
Even before your repayment plan has been officially confirmed by the bankruptcy court, you must start making regular payments until the plan has been approved. Your payment plan’s specifications and deadlines will offer more information about your obligations, and you should start making these payments within one month of declaring bankruptcy.
When completing your bankruptcy paperwork, you must honestly and accurately disclose your income, assets, liabilities, and other financial information. If you lie on the paperwork or otherwise commit fraud, the court will dismiss your case, deny your request for debt discharge, and report you to the US Trustee’s Office for further investigation. You may be charged with a criminal offense and, if you are convicted, be forced to pay fines or complete a prison sentence.
Your Chapter 13 bankruptcy case may be dismissed for any of the reasons listed above, so it is crucial to secure legal representation right away if you are considering filing for bankruptcy. To ensure you follow the law and have the best chance of approval, contact Steele Law Firm today. Our bankruptcy attorneys can answer your questions, explain your debt relief options, and help you navigate the bankruptcy process to achieve the optimal results in your case.