Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is also known as a “wage earners plan.”  This form of bankruptcy allows individuals with regular incomes to establish plans to repay their debts.  During the course of a Chapter 13 case, creditors may not, without prior permission from the Bankruptcy Court, start or continue their collection efforts.  A chapter 11 bankruptcy is also a form of bankruptcy which generally involves a repayment plan, but Chapter 13 bankruptcy proceedings are less complex and move along more quickly than Chapter 11 filings.

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What are the requirements for a Chapter 13 bankruptcy?

Under Chapter 13 of the Bankruptcy Code, debtors propose an installment plan to repay all or some of their debts during a period of either three or five years.

Under federal law, any individual, even those self-employed or running an unincorporated business, may qualify for Chapter 13 relief as long as their secured and unsecured debts do not exceed the amounts permitted by the Bankruptcy Code. As these amounts change periodically, it is critical to discuss these thresholds with your attorney. Chapter 13 is for individuals only; business entities, corporations and partnerships do not qualify for Chapter 13 bankruptcy.

If your monthly income is under the current New Jersey state median and you do not own any real property with equity, your installment plan will typically be three years. Individuals with real property or incomes greater than the state median must have five-year repayment plans.

In a Chapter 13 arrangement, you may be able to keep the property you own, as long as you are making satisfactory payment arrangements.  This includes real estate, your car, tools for your business, and household furnishings.

Can your debts be eliminated by a Chapter 13 bankruptcy?

Bankruptcy proceedings are comprised of dischargeable and nondischargeable debts. In a “straight” Chapter 7 case, you are not required to pay back nondischargeable debts, and creditors may not demand payment. Nondischargeable debts are those you’re still responsible for after any bankruptcy proceeding. The case is different for Chapter 13 bankruptcy.

In a Chapter 13 case, a repayment plan is proposed through which you may repay some debts in full, and others in part. The remainder of your dischargeable debt will be discharged at the conclusion of your plan (three or five years).

Nondischargeable debts include student loans, spousal support or alimony, child support, certain legal fees, and certain taxes or other money owed to a government agency.

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What is Loss Mitigation?

Some individuals who are having trouble obtaining a loan modification their home mortgage and who qualify for a Chapter 13 bankruptcy proceeding, will also utilize the Loss Mitigation process available through the New Jersey Bankruptcy Court.

Loss Mitigation is a court-supervised loan modification process.  It is far more likely to yield desirable results, stop foreclosure, and put your mortgage payments bank on track, than an ordinary, out-of-court loan modification process.

Ask your New Jersey bankruptcy attorney to help you learn more about the Loss Mitigation process and whether it can help you.

Free Consultation. Lucid Law can help you get control over your finances. Contact us for a free consultation to learn more about filing for Chapter 13 bankruptcy.

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At Karina Lucid Law, we can assist you in filing bankruptcy and help you get a fresh start through bankruptcy.

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