What Is Chapter 13 Bankruptcy?
Chapter 13 is a repayment plan bankruptcy for individuals and married couples. Businesses may not file for Chapter 13, but if you are a sole proprietor or an owner of a business, you are still eligible to file Chapter 13 and operate your business. A Chapter 13 – like all other Chapters of Bankruptcy – can be used to stop foreclosure, stop garnishments, and stop lawsuits. It can also be used to recover a vehicle that has been recently repossessed. If your car has been repossessed and it has not been sold at auction, Chapter 13 requires that your lender return the vehicle to you with all of your belongings. In these situations, we often file your case as an “Emergency Chapter 13” where we only need some of the documents to get a case number. Once you file, you are protected by the Automatic Stay – which puts a stop to foreclosures, garnishments, lawsuits, and other actions against you and your property.
Stop Foreclosure | Stop Repossession | Get Out of Debt
The Chapter 13 Plan is a powerful tool to combat debt. It can allow you to get caught up on a mortgage, to pay off a vehicle at a reduced rate, to pay back taxes over a longer period of time than usually allowed, to pay off a mobile home or a short-term mortgage at a reduced rate, or to discharge debt when you do not qualify for a Chapter 7. In a Chapter 13, your debts are grouped into different categories and you propose a plan to repay some or all of that debt over a period of three to five years. Those categories are discussed in further detail below. For more information, contact us for a free consultation with one of our Ocean Springs Chapter 13 lawyers.
To qualify for Chapter 13 bankruptcy, you need to meet certain requirements and demonstrate that you will be able to repay your debts within 3 to 5 years through a repayment plan. To qualify for Chapter 13, you must have:
- Debt Within The Limitations: Current as of July 2023, if your combined total secured and unsecured debts are less than $2,750,000, then you may file for Chapter 13. Please keep in mind that debt limitations are adjusted periodically to account for inflation.
- Regular Income: This will be proof that you can make monthly payments. Your income can come from various sources, such as employment, self-employment, retirement benefits, or Social Security.
- Disposable Income: Aside from regular income, you must have enough disposable income to make your repayment obligations. Disposable income refers to the amount that is left over after deducting any reasonable and necessary living expenses from your monthly paycheck.
- Completed a Credit Counseling Course: This must be done through an approved agency and within 180 days before filing for Chapter 13.
Have more questions about qualifying for Chapter 13? Speak with an experienced Chapter 13 lawyer to accurately evaluate your eligibility based on your unique situation. Call Sheehan & Ramsey to request a free initial consultation.
How To File For Bankruptcy Chapter 13
If you are struggling against debt, filing for Chapter 13 bankruptcy may be an option if you qualify. Below is a basic overview of the Chapter 13 process:
- Evaluate Your Financial Situation: Assess your debts, income, assets, and expenses to determine if filing for Chapter 13 bankruptcy makes the most sense in your situation
- Complete Credit Counseling: Before filing for Chapter 13, complete credit counseling with an approved agency. This course will help you understand the implications of bankruptcy and allow you to explore alternatives to bankruptcy.
- Gather Required Documentation: Collect necessary documents for filing, such as proof of income, tax returns, bank statements, and a list of debts and assets.
- Prepare and File the Bankruptcy Petition: Work with a Chapter 13 lawyer to prepare and file the bankruptcy petition in the district where you reside.
- Create a Repayment Plan: Develop a Chapter 13 repayment plan with your attorney that outlines how you will repay debts over a 3 to 5-year period.
- Attend the 341 Meeting of Creditors: Attend the meeting of creditors to address any questions from the bankruptcy trustee and creditors regarding your repayment plan.
- Follow the Terms of the Repayment Plan: When the court approves your repayment plan, make regular payments to the bankruptcy trustee based on the terms.
- Complete Financial Management Course: Take a financial management course from an approved provider. The purpose of the course is to provide you with tools and information on how to manage your finances effectively in the future
- Obtain a Discharge of Debts: After successfully completing the repayment plan and financial management course, receive a discharge that eliminates eligible debts.
Considering bankruptcy? To file Chapter 13 bankruptcy in Mississippi, turn to the experienced legal team at Sheehan & Ramsey. Our dedicated Chapter 13 lawyers have a deep understanding of bankruptcy laws and can provide the guidance you need. We offer a free consultation to evaluate your financial situation, discuss your options, and determine if Chapter 13 is the right choice for you. With 5-star client reviews, competitive costs, and a commitment to providing personalized service, we have built a strong reputation in the local community. As a local law firm with deep roots in Mississippi, we understand the unique challenges you may be facing. We will be by your side throughout the entire bankruptcy process, helping you navigate the complexities and guiding you toward a brighter financial future. With years of experience in bankruptcy law, you can trust us to help you regain control of your financial future. Contact a Chapter 13 lawyer from our firm and schedule a free consultation today.
Priority Debt: Taxes, Child Support, Alimony, etc.
Priority debt must be paid in full over the plan. This includes past-due child support/alimony and taxes incurred in the past three years. If the taxes were due more than three years before the case was filed, then the taxes are not priority and they may be dischargeable. If the taxing authority has filed a lien, then the taxes may be treated as secured debt. Since tax issues in bankruptcy are complex, you should discuss this with one of our Ocean Springs Chapter 13 attorneys.
Secured Debt: Mortgages, Cars, etc.
Secured debt includes debt secured by collateral like a home mortgage and a car loan. How your secured debt gets treated depends on a number of factors related to the debt and the collateral. Some secured debts may be paid directly outside the bankruptcy if you are current on your payments and the debt is a long-term debt. If you do not want to keep the collateral and walk away from the loan, you also have the option of surrendering the collateral and discharging the debt. If the loan is eligible, you may be able to “cramdown” the loan – paying the amount the collateral is worth instead of the amount that is owed. This is extremely useful when it comes to loans with older vehicles or title loans. This “cramdown” is very useful when it comes to mobile homes as well. We have helped people pay off 15-year mortgages in five years, paying less than their regular note. To determine if your loan is eligible, please schedule a free consultation with one of our attorneys.
Unsecured Debt: Medical Bills, Credit Cards, Personal Loans, etc.
The last category of debt is unsecured debt (credit cards, personal loans, medical bills, etc.). In a Chapter 13, unsecured creditors are compensated based upon the Liquidation Test and the Calculation of Disposable Monthly Income. The Liquidation Test looks at whether any assets you own would be liquidated in a Chapter 7 case. You must ensure that your creditors in a Chapter 13 receive the same amount as they would if you filed a Chapter 7 where the nonexempt property would be sold. The Calculation of Disposable Monthly Income is similar to the means test. If the test determines that you have disposable monthly income, then you are required to pay that disposable income to your creditors over the course of your bankruptcy plan.
The Chapter 13 Plan
The Chapter 13 Plan is a useful tool and it can be used in creative ways to reorganize your debt and come out ahead. The Plan is proposed by you – the Debtor and subject to approval by the Court. Our lawyers draft the plan for you, taking into account the best options for reducing how much you owe while keeping the property that you want to keep. The Plan is not set in stone, however. If your circumstances change, you can modify, convert, or dismiss your bankruptcy depending on what is right for you.