For those drowning in debt, bankruptcy sounds ominous. That, however, is not the case. For many, filing for bankruptcy gives them a chance at a fresh start without having to worry about debt collectors and putting food on the table.
Consider the following questions: Are bill collectors calling you? Do you only make minimum payments on your credit cards? Do you use credit cards to pay for necessities? Are you considering debt consolidation? Are you uncertain as to how much money you actually owe? If answered yes to two or more of those questions, a Baltimore Chapter 13 bankruptcy lawyer from Belsky & Horowitz, LLC can help you determine if bankruptcy is the right option for you.
Chapter 13 Bankruptcy: Reorganizing Debt
A Chapter 13 bankruptcy is also called a wage earner’s plan. Unlike filing under Chapter 7, Chapter 13 bankruptcy means you can usually keep your property. However, you must earn wages or have some other source of regular income. In addition to that, you must agree to pay part of your income to your creditors.
When you file a Chapter 13 claim, the court has to approve your repayment plan as well as your budget. You’ll be appointed a trustee who will collect payments from you, pay your creditors, and make sure you follow the terms of your repayment plan.
To be eligible for Chapter 13 relief, an individual’s unsecured debts must be less than $394,725 and secured debts must be less than $1,184,200. It’s important to note that those amounts are adjusted periodically to reflect changes in the consumer price index.
The Chapter 13 Process
Under a Chapter 13 bankruptcy, the debtor proposes a three to five year repayment plan to the creditors. They offer to pay off all or part of the debts with their future income. In most cases, Chapter 13 is used to prevent a house foreclosure, make up missed car or mortgage payments, pay back taxes, stop interest from accruing on tax debt, and keep valuable non-exempt property.
To file under Chapter 13, the debtor must have a regular source of income, as well as some disposable income to apply towards the payment plan. According to the United States Courts, the application process begins with the debtor filing a petition with the court. Along with the petition, schedules of assets and liability, a schedule of current income and expenditures, a schedule of executory contractors and unexpired leases, and a statement of financial affairs must be included.
After submitting the proper documentation and paying the filing fees, an assigned trustee will hold a meeting of creditors. The debtor has to attend the meeting and answer questions regarding how they plan to follow through with repayment.
If the Chapter 13 process is successful, the debtor will provide payments of fixed amounts to the trustee on a regular basis. The trustee is responsible for distributing the funds to the creditors according to the terms of the plan.
Common Maryland Bankruptcy Exemptions
When filing for bankruptcy, people often what to know what they will be allowed to keep. Because Chapter 13 is more focused on reorganization than liquidation, this can make the exemptions process seem confusing.
It’s important to work with a legal representative when filing bankruptcy, as laws have the potential to change. With Chapter 13, exemptions help determine how much of your debt you have to pay back. If, for example, you would have had assets that wouldn’t be protected in a Chapter 7, you have to make sure that your repayment plan pays the unsecured creditors at least among what they would have gotten with a Chapter 7.
When Is Chapter 13 the Right Path for You?
Chapter 7 bankruptcy involves liquifying assets. There are a number of situations where a Chapter 13 plan is preferable. If, for example, you want to repay your unsecured debts and can do so in a reasonable amount of time, Chapter 13 can set up a repayment plan that works and you won’t have to worry about debt collectors.
Chapter 13 is also beneficial if you have valuable nonexempt property that would be lost in a Chapter 7 case, or if you would not be eligible for Chapter 7 benefits under the means test. There’s also the possibility you could have debts that could be dischargeable under Chapter 13, but not Chapter 7.
The Importance of Having a Bankruptcy Attorney on Your Side
Filing Chapter 13 bankruptcy is a complex and involved process. It’s best to work with an experienced legal representative who can guide you through the steps. The lawyers at Belsky & Horowitz, LLC understand how this process can be intimidating. We’re here to provide clarity and answer your questions.
When you work with a bankruptcy attorney from our firm, we will examine your financial situation, help you with preparing a budget, devising a Chapter 13 repayment plan, and help you overcome any legal obstacles that could arise.
Frequently Asked Questions
If you’re thinking about filing for Chapter 13 relief, it’s normal to have a lot of questions. While your bankruptcy attorney will guide you through the process and make sure you understand your rights and obligations, you’ll benefit from having a basic understanding of the process beforehand. Let’s take a look at some of the most frequently asked questions about Chapter 13.
How is Chapter 13 different from private debt consolidation?
Chapter 13 is a court protected repayment plan. This means that the courts’ powers are far beyond those of a private debt consolidation service. For instance, the court can prohibit creditors from foreclosing on the debtor’s property and they have the right to discharge a debtor from the unpaid portion of debts. Private debt consolidation companies do not have any of those powers.
What is a Chapter 13 discharge?
While Chapter 13 sets up a repayment plan for debts, there are some dischargeable debts a person can be released from paying. This means that the creditors cannot attempt to collect the debt. Examples include debts for willful and malicious injury to property, tax obligations, and debts from property settlements in divorce or separation proceedings.
What happens if a debtor is temporarily unable to make the Chapter 13 payments?
If a debtor is unable to temporarily make their payments, the plan can typically be modified so they can resume payments when they are able. If, however, it appears the debtor will no longer meet the obligation of their repayment plan, the case could be dismissed or converted to a Chapter 7.
Secure Your Future with Belsky & Horowitz, LLC
Our Baltimore law firm understands how precarious of a situation it can be when you’re considering filing bankruptcy. With the laws and requirements involved, it’s best to work with a law firm that will guide you through the process and look out for your financial future. If you’re struggling financially and what to learn more about your options, a Baltimore Chapter 13 bankruptcy lawyer can help.
Schedule a consultation with our firm today. We’ll review your situation and help you determine how best to proceed for the sake of your future. If filing for Chapter 13 relief is the course you decide, we’ll be with you every step of the way. Contact us today to learn more.