Going into bankruptcy can be frustrating, but it’s also a way to get through difficult financial times and find better financial footing. Wanting to get through bankruptcy and to get into a better financial position is great. It means you’re taking responsibility for your money matters.
Do you know what the courts look for in a Chapter 13 bankruptcy application, however? In contrast to a Chapter 7 bankruptcy that seeks to discharge all or most of your debts entirely, Chapter 13 bankruptcy is designed to let you reorganize your debts. You will still need to make payments for the next three to five years to pay off what you owe (or, at least, a portion of those debts). Any remaining debts that are included in the bankruptcy could be discharged after that point.
You can only file for Chapter 13 bankruptcy if the sum total of your unsecured debts is less than $394,725 and your secured debts are less than $1,184,200. While Chapter 13 is designed for people, not businesses, it is used by sole proprietors who have accumulated a lot of business debts they cannot pay even though they still have income.
Assuming you qualify for Chapter 13, your priority debts (those that can’t be discharged) and secured debts (such as your mortgage) will be restructured in a way that makes payments easier. Your unsecured debts will also be reorganized and some may be eventually discharged.
Chapter 13 is considered a voluntary program. If making the payments becomes untenable, you may later convert to a Chapter 7 bankruptcy, instead.
To learn more about how bankruptcy works or whether Chapter 13 is right for you, reach out to an experienced attorney today.