Anyone can find themselves facing overwhelming debt due to unexpected life events, such as a medical emergency or job loss. For many, declaring bankruptcy provides the ideal solution for regaining financial freedom. If you are considering bankruptcy to provide relief for your own economic hardship, it’s important to have clarification of your filing options. Based on your unique circumstances, you will either petition for Chapter 7 or Chapter 13. A bankruptcy lawyer is the best place to turn for answers to all your questions, but in the meantime, here are some of the most common inquiries debtors have regarding Chapter 13.

Chapter 13 Bankruptcy FAQ

How does Chapter 13 bankruptcy work? 

Chapter 13 bankruptcy is a reorganization of debts. It allows a debtor to repay all or a portion of their unsecured debt according to a court-approved repayment plan. This typically lasts three to five years, during which no penalties or interest will accrue. Once the plan has been completed, the debtor is relieved of their obligations to pay the remaining balance on dischargeable debts. 

Who is eligible to file Chapter 13? 

To qualify for Chapter 13, debtors must earn a steady income and have enough means to make the monthly payments on their repayment plan. Additional eligibility requirements include not having unsecured debt equaling more than $336,900 or secured debt more than $1,010,650, attending a credit counseling course, and not having a previous bankruptcy case dismissed within the last 180 days.  

Can Chapter 13 bankruptcy stop foreclosure?

Those who are facing the risk of foreclosure can often save their home by filing Chapter 13 bankruptcy. As soon as the petition is filed, an automatic stay will be enacted, halting all foreclosure proceedings. The lender will be required to accept arrearages over the course of the repayment plan as long as the debtor also continues to pay their regular monthly mortgage. 

What debts are dischargeable in Chapter 13?

Only certain types of debt can be discharged after a debtor has fulfilled all the terms of their repayment plan. This typically includes credit card bills, medical expenses, personal loans not secured by collateral, and any judgments ordered in negligence-related cases. Debts that are not considered dischargeable are child support and alimony obligations, recent taxes, student loans, and criminal fines.

To determine if Chapter 13 bankruptcy is your best option for eliminating money troubles, contact The Law Office of J. Baron Groshon. The firm’s legal team is dedicated to helping residents in Charlotte, Concord, Gastonia, and Lake Norman, NC, overcome debt and reclaim control of their finances. They will use their expertise in this area of law to carefully assess your current financial state before recommending the type of bankruptcy filing they believe is most suitable for your specific case. Call (704) 342-2876 to schedule a consultation or visit their website for more information.