Chapter 13 Bankruptcy Legal Specialists in Grand Rapids, MI
Chapter 13 Overview
Bankruptcy gets a bad reputation for being the “final stop” on the path to financial ruin. It’s one of the only options left for consumers when their debt has climbed up enough that they can’t pay any of it. However, the different chapters of bankruptcy can give you as the debtor much more flexibility than you think.
Chapter 13 bankruptcy is one of the more popular chapters that we file. Often called “Wage Earner’s Bankruptcy”, this chapter involves letting you discharge a lot of your unsecured debts while catching up on payments for things like your mortgage and cars. No bankruptcy can eliminate all of your debts. There are certain things that are always going to require payment like student loans, most taxes, alimony, or child support.
To qualify for a chapter 13 there a few requirements you have to meet:
- Have a steady income
- Be current on tax filings
- Have unsecured debt under $419,275 and secured debt under $1,257,850
- Not filed for a chapter 13 for two years, or a chapter 7 for four years
For you and your attorney to file for Chapter 13 you’ll need to provide some documentation:
- A list of creditors (people who you owe money to) and the amount that you owe
- Proof of income
- List of any properties you own or leases in your name
- A list of your monthly living expenses
- Tax information (federal tax return and any unpaid tax statements)
These things do not have to be exact right away. On your first consultation with an attorney, you’ll get the chance to walk us through your situation. Documents can also be amended to better describe your situation if you uncover more information or if expenses/income fluctuate. Once we get closer to filing, we’ll need to be a little more specific, but your legal team will work with you to make sure that happens.
Once your case is filed, the road becomes much easier. You and your attorney will come up with a repayment plan that shows how your income can be used to make certain payments. Priority claims must be fully paid (bankruptcy filing, some taxes, child support), secured debt with collateral (house or car) also must be paid in full in most cases. Unsecured debts (credit cards, medical bills) are negotiable. The judge reviews your income and repayment plan and then rules how much you’ll owe each of your creditors. The ruling can range from the full amount owed to none of it.
The other portion of this that many of our clients say is “too good to be true” is the actual payment of these debts. You do not pay these debts directly. Based on your monthly expenses, income, and the repayment plan that we come up with, you’ll pay a certain amount every month to a person called a Trustee. The Trustee takes those monthly payments and distributes that money to the creditors (people you owe money to) on your behalf. They are paid based on the amount that the judge ruled they are owed, and they are not allowed to contact you to ask for more money once you’ve filed bankruptcy.
This payment plan is created to last 3-5 years. During which time, you as the Debtor will continue making those monthly payments to the Trustee who will continue paying off those debts. Once the payment plan is completed, your attorney will help you finish up any outstanding obligations on your end so that you can receive a discharge order from the bankruptcy. These obligations are usually not difficult to complete, but can include things like credit counseling (a short seminar that briefs you on finances and ways to stay afloat after bankruptcy), minor paperwork, etc.
All of that being said, this is only a brief overview of how Chapter 13 Bankruptcy works. Every case is different, and there are always bumps along the road that your attorney is able to help you navigate. Repayment plans can be amended, income and expenses can fluctuate, etc., and the general process can be frustrating and confusing at times. Having a reputable bankruptcy attorney who understands the complexities of your case is the most important tool that you can use during a bankruptcy.