Thomas K. McKnight - Ch. 13 Bankruptcy Attorney in Orange County, California

What Is Chapter 13?

Chapter 13 refers to a United States bankruptcy proceeding in which debtors undertake a reorganization of their finances under the supervision and approval of the courts. Individuals as well as married couples, even if self-employed or running an unincorporated company, are eligible to declare Chapter 13 bankruptcy.

As part of a Chapter 13 reorganization, which is also called a wage earner's plan, debtors have to submit and follow through with a plan to repay outstanding creditors within three to five years.

In most situations the repayment plan must offer a considerable payback to creditors-- at least equal to what they would get under other forms of bankruptcy-- and it has to, if needed, use 100% of the debtor's disposable income for payment.

Understanding Chapter 13

With a Chapter 13 bankruptcy, debtors must assemble a list of all creditors along with the amount of money owed to each, a list of any property owned, information regarding income amounts and sources, as well as detailed information concerning monthly expenses.

A debtor then pays an agreed-upon monthly amount to an appointed, impartial bankruptcy trustee, effectively consolidating debts into one monthly amount. The trustee subsequently allocates the money to the debtor's creditors. Debtors have no direct contact with creditors under Chapter 13 protection.

People are qualified to utilize Chapter 13 only if their debts are below particular limits: $419,275 for unsecured debt and $1,257,850 for secured debt as of February 2019 (increases come in three-year periods).

Filers have to also have completed credit counseling to be considered eligible for Chapter 13.

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