What Are The Requirements To File For A Chapter 13 Bankruptcy?
You have to be eighteen years old to file a bankruptcy case and have a social security number or EIN. You have to obtain the certificate of credit counseling from a federally approved credit counseling agency. Your debt has to be below certain debt limitations to file Chapter 13. The debt limitations change every so often. Right now, if your secured debt is more than $1,257,850, you are above the debt limitation. If your unsecured debt is above $419,275, you are above the debt limitation. A person who is above the debt limitations could certainly qualify for a Chapter 7 if all the other requirements are met. Chapter 7 is the typical type of bankruptcy case that we do for most people.
What Assets Can Someone Retain In A Chapter 13 Bankruptcy?
In Virginia, we have what is called the “Poor Debtor’s Exemption”. It’s a simple list of things you get to keep and that no one can take away from you, no matter what. 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, household furnishings up to $5,000, 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. In addition to those automatic exemptions, each householder in Virginia is entitled to a once every eight years “homestead” exemption of $5,000. ($10,000 if you are 65 or older). It’s kind of a wild card exemption, in that you get to keep any kind of property up to $5,000. Since July 1st of 2020 you also get to exempt up to $25,000 per person for real or personal property used as your principal residence. This could even be a car that you live in!
How Is The Right Kind Of Bankruptcy Determined For An Individual?
Sometimes people file a Chapter 13 because they have done their research. We had someone last week who wanted to do a Chapter 13 although she very well qualified for a Chapter 7. She knew that if she filed a Chapter 13 she could “cram down” her payments for her car, which meant that her $475 a month car payment could now be $156 a month. To her, that was a significant enough savings stretching it out over five years to make it worth filing a Chapter 13. The conversation begins with gathering information on assets and liabilities, the purpose being to eliminate your liabilities. People look to us for our expert advice. The number one rule of bankruptcy is that you absolutely must list all debt. The number two rule is you absolutely must list all assets.
Is It Easier To File For A Chapter 13 Than A Chapter 7 Bankruptcy?
As we have been practicing bankruptcy law for more than thirty years, we find that filing Chapter 7 is much easier to file than a Chapter 13. It is a little harder to qualify for Chapter 7 since 2005, but anyone with regular income can qualify to be in a Chapter 13 repayment plan. However, one of the huge advantages of Chapter 13 is that interest abates on all those unsecured debts! So, Chapter 13 has certain advantages. Also, a person usually has to be below the “median” income for their state to qualify for Chapter 7. Otherwise, they have to file a Chapter 13 and be in a repayment plan.
How Long Does It Typically Take For The Completion Of A Chapter 13 Bankruptcy?
Typically, if a person does what they are supposed to do, it takes five years from the date of filing until they make their last payment. That is sixty monthly payments for a Chapter 13. If someone is a “below median” debtor, they could have that period of time shortened. However, most Chapter 13 cases last five years. We see a lot of cases that do not make it. People don’t like making the extra payment in addition to their mortgage payment and they “bag out”. That is, they quit. We have quite a few people who do not succeed. But a huge advantage of Chapter 13 is consolidating all the payments into one, and the only creditors who get paid are those that file a “Proof of Claim”, which, in addition to the cessation of interest, can result in paying back a lot less of your debt.
For more information on Requirements For A Chapter 13 Bankruptcy, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (540) 788-2273 today.
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