One of the most common ways to declare bankruptcy is through Chapter 13 or reorganization of debt. This method requires you to pay back some or all of your debt after creating an extensive debt repayment plan. It is often difficult to qualify for this kind of bankruptcy since it requires the debtor to repay the debt using their own income. In order to be eligible for Chapter 13 bankruptcy, secured debt must not equal more than $1,149,525 and unsecured debt must not exceed $383,175.
Once a person is considered eligible, they are required to file Chapter 13 paperwork and receive credit counseling from an agency office that is approved by the United States Trustee’s organization. There are fees and charges associated with this process, however if an individual is unable to pay, the agency must provide the counseling service for free.
The main purpose to counseling is to create a repayment plan to restructure your debt. The detailed schedule will outline how, when, and how much you will pay towards each debt. Courts often have a suggested way of paying debts however there is no official plan. Priority debts must be paid in full according to your payment plan. These include child support, alimony, wages to employees, and specific tax obligations. In your plan, any remaining income must go towards secured and unsecured debts. In some cases, unsecured debts may be discharged partially or completely, however if funds are available to pay towards these, the courts will demand the debts be repaid.
According to the website of the attorneys at Gagnon, Peacock & Vereeke, P.C., speaking with a bankruptcy lawyer can help you fully understand the benefits of filing for bankruptcy using Chapter 13. If you or someone you know is considering bankruptcy, consult an attorney in your state to discuss your situation and legal options.