Friday, August 24, 2007
What is Chapter 13 Bankruptcy?Sometimes called "reorganization bankruptcy," Chapter 13 bankruptcy is quite different from Chapter 7 bankruptcy. In Chapter 7, most of your debts are totally wiped out, and, in exchange, you must relinquish any property that isn't exempt from seizure by creditors. In Chapter 13, you don't have to relinquish property, but you must use your income to pay some or all of what you owe to your creditors over time (usually 3-5 years depending on debts and income).
Because Chapter 13 requires you to use your income to repay your debt, you and your bankruptcy lawyer will have to prove to the court that you can afford to meet your payment obligations. If your income is too low or irregular, the court might not allow you to file Chapter 13, and if your total debt is too high, you will not be allowed to file Chapter 13. Your bankruptcy lawyer will explain eligibility to you in more detail.
Typically, before you file Chapter 13 bankruptcy, you must receive credit counseling from an agency approved by the United States Trustee's Office. These agencies are allowed to charge a fee for their services, but they must provide counseling for free or at reduced rates if you cannot afford to pay. There is also a filing fee for Chapter 13, which your bankruptcy lawyer will explain to you at your consultation.