Chapter 13 Bankruptcy: Top Ten Questions and Answers
You want to file for Chapter 13 bankruptcy to catch up on missed loan payments and to eliminate your burdensome debt. After all, bankruptcy seems like it would solve your problems once and for all and give you a fresh start. But bankruptcy is an overwhelming process and comes with a lot of emotional baggage and confusing paperwork. You may have various questions about the process of bankruptcy and how it will affect your life.
No matter what your situation is, we are here to help you through this challenging time. At The DeVries Law Firm, P.A., we know how important it is for you to have a thorough understanding of the legal issues involved and the importance of careful preparation of your documents so that you can get the most out of bankruptcy protection.
Chapter 13 Bankruptcy in Florida – FAQs
Our Florida bankruptcy attorneys have put together everything you need to know by answering some of the common questions clients generally ask about Chapter 13 bankruptcy on this page. These FAQS will help you understand the basics, know what it takes to file for bankruptcy, determine if it is the right option for you, and learn how Chapter 13 affects your mortgages and foreclosures.
So here are the answers to the top ten commonly asked questions about Chapter 13 bankruptcy.
Am I eligible for Chapter 13 bankruptcy?
You can file bankruptcy under Chapter 13 if:
- You are an individual or a couple and not a business entity
- You have regular income and filed your income tax returns
- Your debt is not more than $419,275 for unsecured debt and $1,257,850 for secured debt
- Your previous bankruptcy petition was not dismissed within the preceding 180 days
- You are not a stockbroker or commodity broker
How does a Chapter 13 Bankruptcy work?
Chapter 13 Bankruptcy is a court-ordered repayment plan that allows you to repay all or a significant portion of your debts in 3-5 years. Under Chapter 13, creditors cannot collect claims directly from you; instead, you make regular structured payments to the Chapter 13 trustee for the period of time specified in the plan.
What debts can I include under the Chapter 13 plan?
All secured debts such as your house or car are covered under Chapter 13 bankruptcy, which includes both the ongoing monthly payment and any arrears. Under unsecured debts, you may include credit card balances, medical bills, personal loans, certain tax obligations and any other debts that are not attached to a specific property.
Who is the trustee?
A trustee in the Chapter 13 case is a bankruptcy court-appointed person who manages all the debt claims and oversees the administration of the plan. The trustee will collect regular payments from you and distribute them to the creditors according to the Chapter 13 plan until the case is closed. You are required to pay all your “disposable income” during the time of the plan to the trustee.
Can I keep my house and car?
Usually yes, and it depends on what types of property you have, your equity in the property, and the exemptions you use. The equity in your home is an asset in bankruptcy and since all home equity is exempt in Florida, you can keep all of your property, including your nonexempt assets. Simply put, you can keep your home when you’re current with your loan payments and when you use the homestead exemption to exempt the equity on your primary residence.
Likewise, you can keep your car when you catch up with your overdue balances and continue making your regular monthly payments. Under Chapter 13, you can even reduce the principal balance and interest rate and also get the option to extend the car payments over a long period.
What if my circumstances change during my Chapter 13 plan?
Since a Chapter 13 plan lasts three to five years, it is not uncommon to experience a change in financial circumstances during that time. If you get sick, lose your job or face an unexpected expense, you might have trouble making your Chapter 13 payments. Under these circumstances, you can request a plan modification, seek to excuse missed payments or request a “hardship discharge” by filing a motion with the bankruptcy court.
How is my minimum monthly payment determined?
Your monthly repayment plan is based on your average income for the six-month period preceding your bankruptcy and the type of debt you have. Your debts will be analyzed to determine whether they are secured or unsecured and priority or non-priority. Using this information, your monthly repayment amount will be calculated and divided into categories and the trustee will fix the order in which your Chapter 13 plan payments need to be distributed each month to creditors in accordance to the priority set out in the law.
Certain debts must be paid back in full regardless of your income and expenses. These debts include: 1) Back taxes 2) Child support 3) Alimony 4) Loans on your house or car that you want to keep 5) The cost of filing your bankruptcy.
When Chapter 13 bankruptcy is better?
The following are some situations where filing for Chapter 13 bankruptcy can be the better option for you.
- You have non-exempt property that you want to keep, which you will lose if you file under Chapter 7
- You have debts that won’t be discharged
- You have a lot of valuable exempt property that is used as security for debts
- You have tax obligation or domestic support arrearages
- You have a regular income but need more time to repay your debts
- You have fallen behind on your mortgage or auto loan payments but Chapter 13 repayment plan can help you save your home from foreclosure or car repossession
How to file for Chapter 13 bankruptcy?
Once you decided to file Chapter 13 bankruptcy, you need to go through these following steps:
- Fill out and complete official bankruptcy forms
- File your bankruptcy petition and pay the filing fee. As soon as you file, you enter “automatic stay” that stops most collection actions against you
- Submit the list of your assets and liabilities, and a schedule of your current income and expenses
- Submit a copy of your credit counseling class certificate at the bankruptcy court
- Submit copies of your last 60 days of your pay stubs
- Submit a proposed payment plan within 14 days of filing the petition
What debts can be discharged at the end of Chapter 13?
When you complete your repayment plan, Chapter 13 bankruptcy discharge can wipe out certain debts that are non-dischargeable in Chapter 7 bankruptcy. Non-priority unsecured debts are the most common types of debts that can be discharged in Chapter 13 bankruptcy. Credit card debts, uncollateralized personal loans, medical bills and utility bills fit here. Student loans aren’t dischargeable unless you can prove in a separate lawsuit that repaying them would cause undue hardship to you.
Our Florida Bankruptcy Attorneys are here to help!Every case is different, as everyone’s financial situation is different. Depending on your exact situation and the uniqueness of your circumstances, you may have more specific questions about filing Chapter 13 bankruptcy. Therefore it is best to discuss your particular needs with a Florida bankruptcy lawyer so that you can learn about all of your options.
Filing for bankruptcy is a big decision and as it can have wide-reaching effects on your life, make sure you know exactly what your choices are before you decide. The attorneys at the DeVries Law Firm, P.A are committed to doing what is best for you and are ready to help you move toward a brighter future, free of debt. Remember, nothing can serve as a substitute for directly speaking with an experienced attorney.
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