What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a debt management vehicle that is designed for people who intend on paying their creditors, but who need a repayment plan and a few years to do so. There are, of course, advantages and disadvantages to filing Chapter 13 bankruptcy, which should be explored with an attorney that specializes in bankruptcy law.
The purpose of Chapter 13 is to provide debtors an extended period of time to pay off most or all of their debts. If a person is considering Chapter 13 bankruptcy as a debt management strategy, he or she will have to qualify to file first.
The qualifying requirements include:
- Unsecured debt balances must be below $360,475. This includes debt like credit cards, personal loans and medical bills.
- Secured debt balances must be below $1,081,400. Examples of secured debt are mortgages and car loans.
- The debtor must agree to attend credit counseling from an approved agency.
Starting the Process
If it is determined that a person is eligible to file Chapter 13, the process begins by appearing in bankruptcy court and filing a petition. The petition lists all debts that need to be settled in the case, including any contracts or leases that are in the debtor’s name.
Financial data is also submitted to the court at the time the petition is filed, including the following:
- Income records
- Expense records
- A list of assets
- A list of debts
- The most recent tax returns
- A statement summarizing the overall financial state the debtor is in
After the petition is filed, a judge will summon the debtor and the creditors to court for a formal hearing. Prior to the hearing, however, the debtor must devise and file a detailed repayment plan. When all parties arrive in court, creditors can see the repayment plan and raise any objections or concerns. The judge determines if any adjustments to the plan need to be made before it goes into effect.
New Debt Limitations
Of course, there are some disadvantages to declaring bankruptcy. In Chapter 13 the debtor intends to repay his debts, but this in no way salvages his credit and a bankruptcy appears on a credit report for 10 years. It can also be challenging to secure new debt before the bankruptcy proceedings are final because the debtor is required to abide by the repayment plan agreed upon in court, which could last several years.
BKCarFinance and Chapter 13 Bankruptcies
Unfortunately, BKCarFianance does not help individuals with open Chapter 13 bankruptcies—the bankruptcy must be discharged first, but there is still hope. If you need a car loan during the repayment period of an open Chapter 13, a Buy Here Pay Here car loan might be an option. For more information on this kind of lending, visit www.CarLotLoans.com.
Disclaimer: This information was created to inform and educate the public but in no way should be considered legal opinions or legal advice. BKCarFinance is not in the business of providing legal advice.