Coming to the realization that your debts are more than you can handle is a rough place to be. Once you know what options you have to deal with these debts, you will have to decide what to do. One of the choices you have is Chapter 13 bankruptcy.
Chapter 13 is often considered the wage earners bankruptcy because you will repay some of the debts that you owe. Because of this, you will have to show that you have the income to keep up with your regular bills and make payments on your bankruptcy.
This form of bankruptcy has some debt limits that you should know about if you plan to file. For example, your unsecured debts must total less than $394,725 and your secured debts must total less than $1,184,200. These figures do change over time to adjust for economic factors, so these are valid figures now.
In addition to the debt limits, there are education requirements that are associated with Chapter 13 filings. One of these is that credit counseling must have occurred within 180 days prior to the filing. Before the bankruptcy is discharged, you will have to complete a financial management course to help you learn how to avoid having to file bankruptcy in the future.
Throughout the bankruptcy process, you will have to make payments as stipulated by the court. You will also have the benefit of an automatic stay, which means that creditors can’t try to contact you to collect the debts.
If you are ready to file, make sure that you have all of your questions answered. Filing for bankruptcy isn’t something you should do until you fully understand what your obligations are throughout the process.
Source: United States Courts, “Chapter 13 – Bankruptcy Basics,” accessed June 30, 2017