Things to Know Before Filing for Chapter 13 Bankruptcy
If you are running a business, whether it is individual or unincorporated, you are eligible for chapter 13 bankruptcy as long as your debt is not more than $1.2 million. The process of filing for bankruptcy is a great way to give yourself a fresh start financially if you have incurred a debt that you are unable to repay at the moment. Here are some important things that you need to know about the filing process.
The legal requirements to be fulfilled before filing
There are certain requirements that have to be met to qualify for chapter 13. Here are a few of them.
- You must have attended credit counseling from a reputable credit counseling body in within a period of 180 days prior to the date of filing.
- You mustn’t have had a previous bankruptcy petition dismissed 180 days prior to the filing as a result of failing to attend court proceedings or failure to comply with the general rules and regulations of the procedure.
- In case a debt management plan was developed during counseling, the court must be notified about it.
These are just a few of the preliminary requirements that one has to fulfill when filing for chapter 13.
How it works
The process is started by filing a petition within the state that the debtor resides. Besides the petition, you must provide the court with important documents such as a schedule with all your assets and liabilities, a schedule of one’s income and expenditure, statements of financial affairs and other related documents. If the court approves your plea, an automatic stay is placed on personal assets. Your debtors also lose the ability to legally collect any debts from you.
The advantages of chapter 13
- Under chapter 13, you have a chance to save your home from foreclosure, a provision that doesn’t work with chapter 7 liquidation.
- You are able to reschedule the debts in accordance with the timelines that have been stipulated in the repayment plan.
- The process acts like a consolidation loan where you make the payments to a trustee, who distributes them to creditors.