What Are The Requirements To File For A Chapter 13 Bankruptcy?
You have to be eighteen years old to file for a chapter 13 bankruptcy and a legal resident of the United States. You have to obtain the certificate of credit counseling from one of those federally approved agencies, and your debt has to fall within a certain range, the range is adjusted periodically, and that is there are debt limitations. Currently, the debt limitations change every so often. Right now, if your secured debt is more than $1,184,200, you are above these debt limitations. If your unsecured debt is above $394,725, you are above the debt limitations. A person who is above the debt limitations could certainly qualify for a Chapter 7 if all the other requirements are met or else they would have to be in a Chapter 13. But Chapter 7 is the typical thing that we do for most people.
What Assets Can Someone Retain In A Chapter 13 Bankruptcy?
In Virginia, we have a list of things that is called the Poor Debtor’s Exemption. The list is antiquated, and it lists what items you may keep. For example the family bible, wedding and engagement rings, family portraits and heirlooms up to $5,000 in value, wearing apparel up to $1,000 or household furnishings up to $5,000 or firearms up to $3,000, all animals owned as pets, medically prescribed health aids, tools of the trade up to $10,000 and all Motor Vehicles up to $6,000. You also get to keep child and spousal support and any tax refunds due to a child tax credit. Those two are new. In addition to those automatic exemptions, each householder in Virginia is entitled to a once in a lifetime homestead exemption.
Homestead exemption has nothing to do with owning a home; it is actually a wildcard exemption that exists if you can file a homestead deed, you have to file a homestead deed within five days after your 341 meeting of creditors in the state of Virginia. We have found it to be somewhat complicated and onerous for people who do not normally practice in Virginia, but that homestead exemption is very valuable. We had a lady who just left my office a few minutes ago who had some life insurance proceeds because her husband just passed away, so her homestead exemption will protect those proceeds because they are otherwise non-exempt. In addition to the $5,000, she has three children and each of those dependent children has an additional $500 exemption, so she has a total of $6,500 in homestead exemptions that will help her to keep that amount of her life insurance.
How Is The Right Kind Of Bankruptcy Determined For An Individual?
If they want to file a Chapter 13, it would usually be because they have done their research. We did have someone last week who wanted to do a Chapter 13 although she very well qualified for a Chapter 7. She knew that when she filed the Chapter 13, she could cram down on her payments for her car, which meant for her that $475 a month on car payment was now going to be $330 a month. To her, that was significant enough savings stretching it out over five years. She was motivated enough to file a Chapter 13. But the conversation begins typically with drawing a picture of someone such as a lady who just left our office and they do not know which bankruptcy they should file for. They look to us for our expert advice.
For instance, that cramming down of a motor vehicle could be an advantage in a Chapter 13. In the case with the woman about the life insurance, her husband left the truck that was worth $30,000 and she owed $43,000, she just decided to surrender it in a Chapter 7. The conversation is me basically drawing a picture on a piece of paper of a person’s financial situation, whole real estate, all vehicles, any kinds of assets they might have and then of course I always say I have a question that is only to make you laugh, and it is the last question, “Do you have any debt?” We talk about the kinds of debts so that the people can understand that your number one rule of bankruptcy is you absolutely must list all debt, the number two rule is you must list all assets.
Is It Easier To File For A Chapter 13 Than A Chapter 7 Bankruptcy?
As I have been practicing bankruptcy law for thirty years, I find that filing Chapter 7 is much easier to file than a Chapter 13. It is a little harder to qualify since 2005, but most people who qualified before still qualify for a Chapter 7.
How Long Does It Typically Take For The Completion Of A Chapter 13 Bankruptcy?
Typically, if the person does what they are supposed to do, it takes five years from the date of filing till they make their last payment that is sixty payments for a Chapter 13. If they are in a blow median debtor, they could have that period of time shortened, but it does take five years in most cases. We see a lot of cases that do not make it, and people do not like making extra payments in addition to their mortgage payment and they lag out, that is, they quit. So we have quite a few people who do not succeed.
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