Chapter 13 Bankruptcy Attorney in Memphis, TN
Chapter 13 bankruptcy is also known as reorganization bankruptcy. In contrast to Chapter 7, Chapter 13 bankruptcy does not involve the liquidation of your assets. On the other hand, you are responsible for repaying at least some of the debt you owe your creditors.
To do so, you and your bankruptcy attorney submit a repayment plan to the court. This repayment plan needs to leave you with enough disposable income to meet your needs. It also needs to satisfy your creditors. To learn more about Chapter 13 bankruptcy, contact The Sweeney Law Firm, P.C. today.
Chapter 13 Eligibility
There are three requirements for filing for Chapter 13 bankruptcy.
1. Debt Limits
The first concerns the amount of debt you owe. Unlike Chapter 7, those filing for Chapter 13 bankruptcy can only have a certain amount of debt. Since the payment plan needs to be executed in five years or less, you need to be able to show that you can execute the payment plan over the next five years. As of 2018, the current debt limits for Chapter 13 are:
$1,184,200 of secured debt
$394,725 of unsecured debt
In the rare case that a filer makes too much money for Chapter 7 and owes too much debt for Chapter 13, they are forced to file for Chapter 11.
2. Income Requirement
Chapter 13 discharges your old debt, but you must repay most of it. In order to do that, you need to show that you have enough income to satisfy the requirements of a repayment plan while simultaneously taking care of your monthly expenses.
3. Businesses Don’t Qualify
Only individuals and married couples can qualify for Chapter 13.
Chapter 13 Filing Process
Chapter 13 bankruptcy cases are much more complicated than Chapter 7. You and your bankruptcy attorney will need to go over your finances and draft a repayment plan. The court takes a look at the plan and gives the creditors an opportunity to object. But there’s more.
Mandatory Financial Classes and Bankruptcy Filing Fees
Not only are you required to pay a fee for filing for Chapter 13, but you are also expected to present a certificate acknowledging that you attended a class on credit counseling to the court clerk. This class helps to determine whether or not you have sufficient income to meet your obligations under Chapter 13. At this point, you will also be required to pay a filing fee for Chapter 13.
There will be a second “debtor education” course you will need to take after you have filed.
Chapter 13 Bankruptcy Repayment Plan
You are required to submit a 5-year repayment plan to the court and your creditors. If your creditors have no objections and the court notes no inconsistencies, then your creditors will be off your back — at least so long as you continue to make payments.
The Confirmation Process
When you submit your repayment plan, you enter into a negotiation. You will not be required to repay the entirety of the debt that you owe. There will be provisions to pay a portion of that debt. Your creditors may demand that your plan includes a larger payment. You will need to show that you are repaying “as much as you can” while still providing for yourself and your family.
The bankruptcy trustee oversees this process. He ensures that the debtor has enough income to repay the plan and that the debtor filed the plan in good faith. In other words, the trustee ensures that the debtor is not trying to manipulate the bankruptcy process to unfairly discharge his debt.
Most plans are executed over five years. Some plans can be executed over three years but require higher monthly payments and have certain restrictions. When a filer qualifies for Chapter 7 but elects to file for Chapter 13 instead, they can file for a three-year Chapter 13.
What Happens if You Can’t Make Payments?
The answer to this question depends heavily on why you cannot make payments. If your financial situation changes and you lose your job, fall ill, or something else beyond your control happens that prevents you from making your monthly payments, the court will try to restructure your bankruptcy with lower monthly payments. In some cases, your unsecured debt may be discharged.
Alternatively, if your income decreases to the extent that you now qualify for Chapter 7, your bankruptcy may be converted and your debts discharged via liquidation. In this instance, you can lose the non-exempt property.
Lastly, you can dismiss your Chapter 13 bankruptcy. If you choose that option, you will still owe the debts that forced you into bankruptcy.
Ending a Chapter 13 Bankruptcy
After your repayment plan has been satisfied to the degree possible, you will need to show the court that you are currently on other expenses such as child support payments. You will also need to show that you completed the financial counseling course that Chapter 13 requires.
If all the requirements are satisfied, the rest of your qualified debt is discharged.
Talk to a Memphis Bankruptcy Attorney Today
The Sweeney Law Firm, P.C. has helped hundreds of Tennessee debtors regain control of their finances. If your debt situation is spiraling out of control, contact us and we can begin constructing a plan for you to discharge your debt today.