There are two common bankruptcy actions for an individual or couple who are overwhelmed by debt to pursue. One is a Chapter 7 action, where the debt is dischargeable and there is no plan to repay creditors, other than the debtors continuing to meet their obligations to secured creditors. There is an income limit for those who wish to pursue a liquidation bankruptcy. The other common filing for individuals is a Chapter 13 action. This involves the reorganization of debt and the formulation of a repayment plan that may extend for a period of three to five years.
One of the key aspects of a Chapter 13 case is that there is a trustee who oversees the development of the plan and then ensures that the debtor is making the scheduled payments to creditors pursuant to this plan. A debtor who decides to pursue a Chapter 13 bankruptcy has to main obligations:
• Develop a repayment plan that will allow for regular payments, through the bankruptcy court, to the creditors over the plan period – a debtor must be reasonable in determining the amount of disposable income that he or she has in order to ensure that the payments are made on a timely basis; and
• Ensure that the creditors are receiving at least as much as they would have if the debtor had filed for Chapter 7 instead of Chapter 13 – in a Chapter 7, non-exempt property is liquidated and the proceeds of the sale of the assets are used to pay down the unsecured debt to the extent possible. A creditor in a Chapter 13 action must receive at least the amount of payment under the plan as he would have done if the debtor liquidated his property to pay off debts.
One of the reasons that a person may choose to file for Chapter 13 protection, even though he or she qualifies for Chapter 7 is that there is a mortgage or other secured debt that the individual wants to address. If a person has a home in foreclosure, or that is about to go into foreclosure, the filing of a Chapter 13 case will put a stop to the proceedings. The repayment plan can be developed with the goal of making current payments on the mortgage, while also catching up on overdue debt. In addition to addressing the primary mortgage holder, it may be possible to strip off a secondary mortgage in a Chapter 13 case.
There are many important considerations that must be made before deciding whether to file for bankruptcy and what type of bankruptcy to pursue. If you live in the East Cobb or Milton area, the experienced bankruptcy attorneys at Charlton & Glover can help you get relief from your creditors and file the bankruptcy action that provides the most benefits for your unique situation. Contact us using the form below or call us at (770) 993-1005 to schedule a free initial consultation.