A Bankruptcy Lawyer Explains Who Qualifies For Chapter 13
Is filing for Chapter 13 bankruptcy the right way to get out from under heavy debts? A bankruptcy lawyer explains the pros and cons of this form of personal bankruptcy. Attorneys agree that it is the best solution for some families.
Finding your way out of a difficult financial situation can be difficult, particularly if you feel like you're drowning in a sea of debt. If you feel like you can never catch up on paying all your financial obligations and are avoiding answering the phone because bill collectors are calling, it may be time to consider filing personal bankruptcy so that you can do away with some or all of your debt and get a fresh start. One of the most common forms is Chapter 13, which can restructure and get rid of your debt over a three to five year period. It isn't the right choice for everyone, however, so be sure you understand what you're doing before you try to handle the process yourself. A consultation with a bankruptcy lawyer is an excellent first step if you're considering Chapter 13.
What Is Chapter 13?
This is a form of bankruptcy that allows you to restructure your debt and slowly pay down the amount of money owed over time. While it doesn't allow you to completely dismiss your obligations, it does significantly reduce the amount of money you'll have to pay to each individual creditor. A trustee is usually appointed who will evaluate your income, expenses and other obligations, then devise a strict budget for you. The trustee will also negotiate with your creditors in order to lower your payments and overall amount due. Rather than pay several different companies or credit holders, you will make a single, monthly payment to your trustee, who will dole out the funds to any businesses or banks to which you owe money. Over a period of three to five years, you should be able to completely pay off your debts for a significantly lower figure. Throughout this process, you can ask your bankruptcy attorney any questions you might have.
What Are The Advantages And Disadvantages?
Chapter 13 allows you to keep certain property or possessions, including real estate, a second car, jewelry and other items that you might otherwise have to sell in order to pay off your debts. Once you file, no one can foreclose on your home or repossess your vehicle for any reason. You can also negotiate a better interest rate and reduce penalties on IRS taxes and student loans, which can't be discharged with other forms of bankruptcy. One of the most important considerations for people who owe money should be to consider others who may suffer financial consequences if you can't pay. For instance, if a friend or relative co-signed a loan for you, collection agencies could harass them or demand payment of your outstanding debts. Chapter 13 prohibits any collection agency or bank from contacting the co-signer in order to collect on your loan.
You will, however, have to devote several years to paying down the balances you currently have. Some people prefer filing this type of bankruptcy because it gives them the opportunity to pay off at least a part of the problem rather than just walking away from their obligations. It can also protect them from forced wage garnishment. Talk to a bankruptcy attorney if your wages are currently garnished or you have additional questions about Chapter 13.
Not everyone qualifies for Chapter 13 bankruptcy. If you aren't sure whether it's a good fit for your financial situation, ask yourself if you meet the following criteria:
• Do you have a steady income that you can rely on?
• Is your personal, unsecured debt (credit cards, utilities, medical expenses, etc.) less than $360,475?
• Is your secured debt (mortgage, car loan, IRS liens) less than $1,081,400?
• Are you willing to pay a trustee a specified amount of money for three or more years?
• Are you concerned about being able to keep certain assets such as property?
• Do you want to file bankruptcy but protect a co-signor on an outstanding loan?
If you answered yes to the above questions, Chapter 13 may be the best way for you to restructure your finances and begin to see the light at the end of the tunnel. For more information, contact a bankruptcy lawyer. He or she will be able to get things started and walk you through the process.
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ABOUT THE AUTHOR
Hawaii bankruptcy lawyer Blake Goodman is experienced in all forms of debt relief. As a CPA, he is uniquely qualified as a bankruptcy attorney in Honolulu who can help you file Chapter 13 in Hawaii. For more information on Chapter 13, visit his website.