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Bankruptcy laws exist to help debtors regain financial freedom from insurmountable debt. However, before submitting your petition to the court, it’s important to understand the different options and what you can expect from each one. Chapter 13 bankruptcy is a common choice for those who still have a steady source of income and want to ensure their assets are protected from Chapter 7 liquidation. Here’s an overview of what to know if you’re considering filing.

Understanding Chapter 13 Bankruptcy 

Eligibility Requirements

To qualify for Chapter 13 bankruptcy, certain criteria must be met. First, you will need to prove that you have enough income available to make court-approved payments to your creditors. Next, you can only have $394,725 in unsecured debts (i.e. credit card bills, medical expenses, and personal loans) and no more than $1,184,200 in secured debts (i.e. mortgage and car loans, child support arrears, and student loans). You’ll also be required to complete a credit counseling course from an approved agency within 180 days of filing. 

How It Works 

Chapter 13 is referred to as a reorganization bankruptcy. Instead of discharging your debts as in a Chapter 7 bankruptcy, it reorganizes them into an affordable repayment plan that lasts three to five years. Over this period of time, you’ll be responsible for maintaining your payments. Once you’ve fulfilled the term of your agreement, the rest of your unsecured debts will be discharged. You’ll still have to pay secured debts in full, and if you wish to keep your home and/or car, you’ll need to continue making payments on those loans.

Benefits of Filing 

Chapter 13 bankruptcyFiling Chapter 13 bankruptcy has a number of advantages. The biggest benefit is being able to keep your assets. It provides an effective way to avoid foreclosure, repossession, and wage garnishment. Also, once your case is closed, you’ll be able to start rebuilding your credit right away and show lenders you’re creditworthy again.

 

If you’re struggling to find relief from financial trouble, reach out to Pearce Law Firm for advice and guidance. Their skilled team of lawyers has more than 15 years of experience handling both Chapter 7 and Chapter 13 bankruptcy cases, and they can determine the best course of action for your particular situation. These bankruptcy attorneys have helped countless clients across Baldwin County, AL, successfully obtain a fresh start to a debt-free life. Call (251) 971-2676 to schedule a consultation, or visit them online for more information on their services.

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