Will You Be Able To Pursue A Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy lawyer is someone who helps their clients petition the court to restructure their debts. The central feature of this process is a repayment plan. In exchange for offering to pay a reduced amount, the debtor is expected to complete the plan within three to five years in most cases.

Eligibility, however, is a big part of the process. Here are four things you should know about whether you'll be able to pursue a Chapter 13 filing.

Outstanding Debt

To file for Chapter 13, a person must have unsecured debts of less than $394,725 and secured debts of less than $1,184,200. Note that eligibility figures are adjusted from time to time to reflect changes in the consumer price index so it's wise to ask a Chapter 13 bankruptcy lawyer what the current levels are.

Unsecured debt refers to lending that isn't backed by real property. For example, a person's credit card debt is usually backed by their full faith and credit. Secured debt is backed by property, such as the car for your vehicle loan or your house for a mortgage.

Ability to Pay

Chapter 13 is sometimes referred to as a wage earner's plan. This means the debtor is making enough money to pay things down as long as the amount owed is reduced.

Notably, a debtor has to prove they'll have the resources required to afford their usual living expenses and pay the debt down if the plan is approved. Consequently, the court will want to see financial information like your last couple of years of tax returns and some recent pay stubs. The judge will also want to see what your expenses are, such as transportation costs, insurance, taxes, and utility bills.

What if You Can't Pay?

If there are doubts about your ability to pay, the court will encourage you to file for Chapter 7 instead of 13. This means instead of getting a reprieve you'll have to liquidate all your expendable assets. This will settle as much debt as possible before the court discharges the rest.

Creditor Objections

A trustee will be appointed to handle most of the work of figuring out whether your plan is good enough, but creditors will have a chance to question you directly and object to the plan. For example, they might assert you have enough money to pay in full. Regardless of what the trustee and your creditors say, though, the final word rests with the judge.