Some people know a Chapter 13 as the “wage-earner’s bankruptcy.” This is because it is reserved for individuals who can afford to make regular payments to the bankruptcy trustee. The money goes toward paying off creditors, and the payments continue for three to five years.
A person’s income determines the length of the repayment plan. If a person’s monthly income is less than the state median, they will repay over three years. If it is greater, the plan lasts five years. While there are some exceptions to these, no bankruptcy repayment plan can last longer than five years.
In order to file a Chapter 13, your secured debts must be below $1,184,200 and unsecured debts have to be under $394,725. There are also other requirements, such as being able to afford the payments after taking care of necessary bills.
As part of this type of bankruptcy, you might be able to save your home. This is important for some who want to avoid foreclosure. You must have a plan to get the past-due balance paid while you continue to make current payments and pay the bankruptcy trustee.
You also have the benefit of the automatic stay when you file this type of case. This prevents creditors from contacting you to try to collect a debt. Generally, other people named on these accounts can’t be contacted either because your case provides repayment in accordance with the court’s requirements.
Before you file for bankruptcy protection, make sure you understand how it affects you. Know your responsibilities and rights so you can ensure compliance throughout the case.