If you’re facing the prospect of filing bankruptcy, you may worry that you will lose all your property. Depending on your circumstances, you can likely avoid this scenario. Some people may need to liquidate their assets through Chapter 7 bankruptcy. But if you want to hold on to your assets, you may find that repaying your debts through Chapter 13 bankruptcy will make more sense. Yet, it’s important to know how the process works before filing, as well as if you qualify for it.
Chapter 13 qualifications
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy does not come with income limitations. Rather, it comes with debt limitations. If you file Chapter 13 bankruptcy, you can have no more than $1,257,850 in secured debts. These debts require collateral – often in the form of a down payment – and include mortgage and auto loans. You also cannot have more than $419,275 in unsecured debts. These debts do not require collateral and include medical bills, credit card bills and student loans.
How repayment works
When filing Chapter 13 bankruptcy, you will create a plan where you outline how you will repay your creditors. Some creditors may receive repayment in full. Yet, those you owe unsecured debts to may only receive partial payment. Before this plan is effective, you must submit it to your local bankruptcy court for approval. Once this happens, you will begin repaying your debts over a period of three to five years, depending on your income. You will make these payments to a court-appointed bankruptcy trustee, who will then pay your creditors. By making on-time payments, you may qualify to receive a discharge on any remaining debts after this period culminates.
Filing bankruptcy is a scary prospect. But by understanding how Chapter 13 repayment works, you may find that it allows you to reset your finances. Consulting an attorney with bankruptcy experience can further ease the process.