Chapter 13 bankruptcy protection is an important type of personal bankruptcy protection to be familiar with because it can help an individual with a reliable source of income but drowning in debt reorganize those debts and repay them over a more manageable time period. This can help a struggling consumer or homeowner hang on to their assets such as a car and remain in their family home while they repay creditors and pay off their debt.
There are certain requirements that must be met to file for Chapter 13 bankruptcy protection. To begin with, the filing party cannot be a business entity, as other options are available for struggling businesses, and they cannot be prohibited from filing by a prior bankruptcy that was filed in the preceding 2 years or have had a bankruptcy petition dismissed in the preceding 180 days for certain reasons. Additionally, they must have filed their income tax returns, fulfilled the credit counseling requirements and their debts must not exceed the limits for Chapter 13 bankruptcy.
Next, as part of the repayment plan worked out, the plan must propose to repay all required debts; repay a certain amount of unsecured debt; and the filing party must have sufficient income that they can rely on to repay their debts according to the repayment plan developed with the help of the bankruptcy court. Repayment plans under Chapter 13 bankruptcy protection are typically 3 to 5 years followed by a debt discharge.
Meeting the requirements for Chapter 13 personal bankruptcy protection is important which is why struggling consumers should be familiar with their options and how to qualify for bankruptcy protection. Different options are available with different eligibility requirements so it is worth exploring options when struggling consumers are seeking debt relief.