Sacramento Bankruptcy Attorney Talks About Chapter 13 Bankruptcy Eligibility
Sacramento Bankruptcy Attorney Talks About Chapter 13 Bankruptcy Eligibility
There are two common bankruptcies for individuals, Chapter 7 bankruptcy and Chapter 13 bankruptcy. The difference between the two is based both on the financial situation of the debtors as well as the solution the debtor is searching for. While everybody can ask for a Chapter 7 bankruptcy (although negative ramifications can apply) not everybody can apply for a Chapter 13 bankruptcy.
As a reminder, a Chapter 13 bankruptcy is a request to the court to allow the debtor to repay their debts on a payment “plan.” The plan can be 36 or 60 months in length. The amount of the plan is based on the debtor’s income, expenses and the debts to be paid. The court is very specific about the order of debts to be paid, which debts can be paid, and how much each debtor gets. A Chapter 13 plan is useful and favored by creditors because a creditor will usually get some of their bills paid, even if they have to wait 60 months to get it. A Chapter 13 plan is useful and favored by debtors because it will allow a debtor a payment plan more attuned to their income and certain assets can be preserved. For example, if possible, debtors can keep their family residence or car much easier in a Chapter 13 than in a Chapter 7 due to the fact that any late or missed payments on the house or car may be “repaid” through the plan instead of all at once. (exceptions apply).
To qualify for a Chapter 13 bankruptcy, a debtor must have a regular source of income so that they can make the plan payments. This must be income and cannot be from unreliable sources (for example, third parties like parents cannot agree to pay the plan for you). The income must be high enough to cover the debtors own living expenses (such as mortgage) with enough left over to make the plan worthwhile. Please note, the term “worthwhile” is not a legal term but a descriptive term because any plan needs to be approved by the court. The court will not approve a plan that fails to repay certain creditors. Finally, there are certain limits for debts that be covered in a Chapter 13 bankruptcy. Secured debts such as real estate cannot exceed $1,010,650 and unsecured debt such as credit cards, cannot exceed $336,900.00. (As of April 1, 2007) Please note, this is a total of debts and not a limit for a single creditor.
If you have further questions or wish for a consult for a chapter 13 bankruptcy, please contact Sagaria Law at 1-800-941-6730 or www.sagarialaw.com for an appointment.
