Overview of Chapter 13 Bankruptcy
Many people who have difficulties digging their way out of debt choose to file for Chapter 7 bankruptcy, the most commonly filed type of bankruptcy nationwide. However, under certain circumstances, filing under Chapter 13 may be more appropriate and favorable for the debtor.
Chapter 13 bankruptcy allows individuals and married couples to repay all or a significant portion of their debts within several years. When filing for Chapter 13 bankruptcy, debtors establish a repayment plan that outlines how they will pay back all or some of their debts over the course of three to five years. However, not everyone may qualify for Chapter 13 bankruptcy. To file under Chapter 13, the debtor must have sufficient regular income to ensure their compliance with the repayment plan.
After all payments under the plan are completed, the court will issue a discharge of the debts included in the plan. With Chapter 13 bankruptcy, you get a chance to keep important assets like your home. Seek legal counsel to determine whether filing under Chapter 13 is appropriate for your specific situation.
When Is Chapter 13 a Good Debt Relief Option?
Many debtors in New York and New Jersey prefer to file for bankruptcy under Chapter 7 since it does not require paying off the debt. However, not all debtors meet the eligibility requirements for Chapter 7 bankruptcy, which is why they may consider filing under Chapter 13. In fact, filing for Chapter 13 bankruptcy provides certain protections that Chapter 7 does not offer.
Some common reasons Chapter 13 bankruptcy may be a good debt relief option include:
- Your income exceeds the Chapter 7 means test, disqualifying you from a debt discharge under Chapter 7;
- You want to keep non-exempt property that would be sold if you filed for Chapter 7 bankruptcy;
- You are facing foreclosure because you are behind on mortgage payments; or
- You are facing repossession of your vehicle because you are behind on car payments.
Consider contacting an experienced Chapter 13 bankruptcy attorney to discuss your unique situation and determine if filing under Chapter 13 is a good debt relief option for you.
Qualifying for Chapter 13 Bankruptcy
In order to qualify for Chapter 13 bankruptcy, you need to demonstrate proof that you filed state and federal income tax returns for the past four years before filing for bankruptcy. Failure to produce proof of filing state and federal tax returns for four years prior to the filing date will result in the dismissal of the bankruptcy case.
In addition to submitting proof of income tax returns filed for the past four years, you need to prove that you will have enough income to meet your repayment obligations under Chapter 13 bankruptcy after subtracting certain expenses and monthly payments on secured debts.
Seek legal guidance from a skilled bankruptcy attorney to help you gather the necessary paperwork and documentation to qualify for Chapter 13 bankruptcy in New Jersey or New York.
The Process of Filing for Chapter 13 Bankruptcy
Before the court confirms the debtor’s repayment plan, the debtor must submit bankruptcy paperwork to prove:
- You are up-to-date on tax filings.
- You are within debt amount limitations.
- You are employed.
- You have enough income to repay the debts over several years.
Before filing for Chapter 13 bankruptcy, you must get credit counseling from an approved credit counseling agency. The counseling must be obtained within 180 days before filing for bankruptcy.
If spouses are filing for bankruptcy jointly, both spouses must get credit counseling. When filing for bankruptcy, you need to submit the certificate proving that you obtained credit counseling along with the Individual Debtor’s Statement of Compliance with Credit Counseling Requirement.