If you’re faced with massive debt that you can’t seem to get a handle on, bankruptcy may be the best option for you. Most individuals file for chapter 7 or chapter 13, each of which entails different methods of relieving debt and satisfying creditors. Debt.org explains how chapter 13 works so you can determine whether it’s the best option for you.
With chapter 7, certain debts are discharged due to a person’s inability to pay. This can also result in the surrender of certain property, including things like homes and vehicles. Chapter 13 does not require debtors to surrender their property. Instead, a repayment plan is devised that allows a person to pay back any debt over a specified period of time. In this case, a distinction is made between secured and unsecured debt.
You’ll be given up to five years to repay debts included in this plan. To prepare, you must provide to the court a list of creditors and how much you owe to each of them. You must also show that you have a steady income via proof of employment. Tax information, a listing of property you own, and recurring living expenses must also be provided. It’s best to work with an attorney to ensure all of your bases are covered.
To qualify for chapter 13, you must meet certain criteria. When it comes to secured debt, such as mortgages, you must not have more than $1,184,200. With unsecured debt, including things like credit card debt, you must not have more than $394,725. You must also be able to show that you have sufficient income to handle a debt repayment plan. Lastly, you must be current on tax filings in order to qualify. If not, you’ll need to settle that issue before filing for chapter 13.