About Chapter 13 Bankruptcy
Who Qualifies for Chapter 13?
It’s important to note that a Chapter 13 bankruptcy isn’t the best solution for everyone. Chapter 13 often works well for individuals who have a steady income and are able to abide by a long-term financial plan. Generally, anyone who earns a stable income and/or manages a sole proprietorship is able to file a Chapter 13, assuming their unsecured and secured debts don’t exceed $336,900 and $1,010,650, respectively. Additionally, individuals must also have the means to pay Trustees, who then pay creditors. Consulting a Lamey Law Firm bankruptcy lawyer can help you determine whether or not you're eligible.
Four Benefits of a Chapter 13:
1. Solution to Arrears
Filing a Chapter 13 gives debtors a blank slate when it comes to mortgage arrears, allowing them to clear defaults, reestablish their mortgages, and avoid foreclosure (see 11 U.S.C. Section 1322 for more information). As part of the Chapter 13 plan payment, arrears are paid to a debtor’s Trustee. After filing, debtors can continue to make monthly payments on their mortgages, while being carefully monitored to ensure they remain up-to-date. It’s worth noting that courts understand first-time mortgage issues; however, they don’t readily give second chances.
2. Rights to Sell Property
Under 11 U.S.C. Section 1303 and Section 363 of the Code, debtors who file a Chapter 13 are granted the right to sell their property. While Chapter 7 Trustees place property up for sale at market value, this doesn’t always generate the most beneficial offers from buyers. A Chapter 13 bankruptcy gives a debtor the freedom to obtain the highest value for their property by liquidating their assets at the best time and via the best method. This also helps debtors to restore themselves financially, as they don’t have to settle for offers on liquidated assets that are well below market value.
3. Non-Exempt Property Retention
With a Chapter 13, debtors can keep non-exempt property they would more than likely lose with a Chapter 7. If over a period of 3-5 years, a debtor is able to pay the Chapter 13 Trustee a sum that equals or exceeds the property’s value, they can retain the non-exempt property. It's vital that bankruptcy attorneys clarify exempt and non-exempt property for the benefit of their clients. Additionally, it’s also important that debtors don't forget to include all assets on their bankruptcy schedules.
4. Protection for Co-Signers
The third reason you should file a Chapter 13, if possible, is co-debtor stay. 11 U.S.C Section 1301, or co-debtor stay, protects co-debtors from creditors looking to collect on a consumer debt. However, for co-debtor stay to remain effective, a debtor must decree in their bankruptcy plan that they’ll pay the co-signed debt - a provision not included in a Chapter 11 or Chapter 7. For this reason, many Chapter 13 plans are filed in Puerto Rico, as a majority of creditors there require the signature of a co-signer.
Significance of a Trustee
Chapter 13 Trustees collect money from debtors and any funds from liquidated property over the course of debtors’ 3-5 year payment plans. On a monthly basis, Trustees allocate the funds they collect from debtors to creditors. Additionally, Trustees evaluate any court documents, consult with debtors and bankruptcy attorneys, and keep track of debtors and their overall adherence to their financial plans. Trustees also put together reports for courts, and make suggestions and requests involving bankruptcy case dismissals or Chapter conversion.
Obtaining a Discharge
In order to receive a discharge in a Chapter 13 bankruptcy, individuals are obligated to meet the discharge requirements outlined under a Chapter 7. Accordingly, they’re required to have adhered to their payment plan throughout its duration of 3-5 years, while making all mandatory payments to Trustees. In addition, debtors are obligated to meet other Chapter 13 stipulations, such as reporting any income changes, completing tax returns, and paying bills on time.
We’re Here to Help You
When you need the adept assistance of a Minnesota bankruptcy lawyer, the Lamey Law Firm is ready to help you determine which course of action best suits your circumstances. We offer our legal services to clients in St. Paul, MN, Oakdale, MN, Cottage Grove, MN and Woodbury, MN.