A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
The average payment for a Chapter 13 case overall is probably about $500 to $600 per month. This information, however, may not be very helpful for your particular situation. It takes into account a large number of low payment amounts where low income debtors are paying very little back.
In many cases, Chapter 7 bankruptcy is a better fit than Chapter 13 bankruptcy. For instance, Chapter 7 is quicker, many filers can keep all or most of their property, and filers don't pay creditors through a three- to five-year Chapter 13 repayment plan.
Disadvantages of Filing for Chapter 13 Bankruptcy
Be aware that it can take up 5 five years for you to repay your debts under a Chapter 13 plan, and debts must be paid out of your disposable income. ... A Chapter 13 bankruptcy can remain on your credit report for up to 10 years, and you will lose all your credit cards.
Generally speaking, the funds you have in your bank accounts are safe when you file for Chapter 13 bankruptcy. ... Chapter 13 also allows debtors to keep bank account funds in excess of the allowable exemption amount provided the excess amounts are worked into the Chapter 13 plan and paid back over the life of the plan.
Chapter 13 Eligibility
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $394,725 and secured debts are less than $1,184,200.
In Chapter 13 bankruptcy, you must devote all of your disposable income to your Chapter 13 repayment plan. Through the plan, which lasts either three or five years, you pay 100% of certain debts and a portion of other types of debts.
Unsecured Debts
In Chapter 13 bankruptcy, you pay your unsecured creditors an amount between 0 and 100% of what you owe them.
Once you've completed your Chapter 13 repayment plan, most remaining nonpriority unsecured debt balances will get discharged. Student loan balances are a notable exception—you'll remain responsible for those.
Chapter 13 Is Likely to Worsen Your Finances
When your Chapter 13 case is dismissed, you are often in a far worse financial position. That's because the interest on your unpaid debts has continued to mount as you've struggled to make payments. And once you're out of bankruptcy protection, you have more debt than ever.
In most Chapter 7 bankruptcy cases, nothing happens to the filer's bank account. As long as the money in your account is protected by an exemption, your bankruptcy filing won't affect it.
If your annual income, as calculated on line 12b, is less than $84,952, you may qualify to file Chapter 7 bankruptcy. If it's greater than $84,952, you'll have to continue to Form 122A-2, which we'll review in the next section. It should be noted that every state has different median income calculations.
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