U.S. bankruptcy laws allow corporations and individuals to get rid of debt either by liquidating assets and repaying creditors or by entering a court-approved reorganization plan. A bankruptcy filing allows most unsecured debts to be eliminated. The U.S. Bankruptcy Code sets forth a few ways for businesses and individuals to get out of debt, and each method has its own chapter of the law. In chapter 13, the reorganization plan allows individuals to repay their creditors.
Who Is Eligible for Chapter 13?
A person with a significant amount of debt and no way to make payments can file for chapter 13 bankruptcy. The debtor can be self-employed or running a business that isn’t incorporated, but they must have enough income to be able to pay creditors back over a three to five-year period. If the person cannot make payments, chapter 11 provides a quick solution to their debt issues; however, their assets may be sold to repay creditors.
A person and their bankruptcy attorney in Glendale, AZ cannot file for chapter 13 if they have done so within the past six months, and the court dismissed the petition, or they failed to follow court orders. Filers must Click Here and go through credit counseling before filing for chapter 13, and they must take a financial management course as well. Bankruptcies stay on a person’s credit report for ten years.
How Bankruptcy Works
A person seeking chapter 13 and their bankruptcy attorney in Glendale, AZ must petition the court and include their income, spending, assets, debts, leases and contracts in that petition. They must also provide documents such as tax returns and pay all fees unless they’re waived by the court. Once a person files, the law gives an automatic stay where creditors are barred from carrying out further collection attempts.
The Repayment Plan
Debtors must file a repayment plan within fifteen days of filing for chapter 13, which covers regular payments on a fixed schedule. Some debts are dischargeable and some creditors may only get partial payments. There are three kinds of debt: priority, secured and unsecured, and the repayment plan must follow certain rules for each debt type; for instance, priority debts must be fully repaid.
