Bankruptcy is sometimes frowned upon, especially if you do not know the flexible provisions under the Bankruptcy Code. Chapter 13 deals with the adjustment of debts. This provision lets the petitioner apply for protection from bankruptcy by seeking a repayment plan to repay the debts.
This repayment plan is usually structured to allow the petitioner to repay the debts over the next three to five years. This is an ideal option for individuals and businesses that cannot repay their debts immediately but can do so soon.
Who can file for Bankruptcy under Chapter 13?
Petitioning for bankruptcy under the provisions of Chapter 13 allows the petitioner to keep his or her home and is, therefore, a popular choice. However, to avail of this benefit and many others, you need to first talk to a lawyer specialized in bankruptcy laws to figure out whether you qualify for it. To be eligible, you need to fulfill specific eligibility criteria.
To begin with, you must have filed your tax returns in the previous four years. Next, you must demonstrate your ability to repay your debt within 3 to 5 years. As of 2020, your unsecured debts need to be under $394,725, and your secured debts must not exceed $1,184,200. These figures are taken directly from the Consumer Price Index and may, therefore, vary in the future.
Also, you would have to dedicate all your disposable income to the repayment of debts. Nevertheless, it can be used to prevent foreclosure of your home, and you may even be able to modify your 2nd mortgage through a procedure referred to as lien stripping.
To sum it up, Bankruptcy under Chapter 13 lets you renegotiate your secured debts, such as mortgages, and buys you enough time to repay your creditors. Also, it prevents the foreclosure of your primary residence and can be a well-planned move for those having multiple secured debts.
However, it is always recommended that you decide after discussing your finances with a Citrus Heights bankruptcy attorney specializing in bankruptcy laws.