Chapter 13 bankruptcy is what many refer to as a “wage earner’s plan. This allows individuals with a regular income to develop a plan to repay all or part of their debts over a three to five-year period. This type of bankruptcy is helpful for individuals who want to keep their property, such as a home or car, while catching up on missed payments.
Key Features of Chapter 13 Bankruptcy
Under Chapter 13, debtors propose a repayment plan to make installment payments to creditors over three to five years. The length of the repayment plan depends on the debtor’s income and the amount of debt. However, to qualify, the debtor must have a regular source of income sufficient to cover the repayment plan.
Unlike Chapter 7 bankruptcy, which involves liquidating assets, Chapter 13 allows debtors to retain their property while they repay debts. Filing triggers an automatic stay, which halts most collection actions, such as foreclosure, repossession, and wage garnishment, providing immediate relief.
Eligibility Criteria
To file for Chapter 13 bankruptcy in Oklahoma City, a debtor must meet the following criteria:
- Income Requirement: The debtor must have a regular source of income. This can include wages, salary, commission, social security payments, pension, or other regular income sources.
- Debt Limits: The debtor’s unsecured debts (such as credit card debt or medical bills) must be less than $419,275. Secured debts (such as mortgages and car loans) must be less than $1,257,850.
- Previous Bankruptcy: The debtor must not have had a bankruptcy petition dismissed within the previous 180 days due to willful failure to appear before the court or comply with court orders, or if they voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property.
If you don’t meet these criteria, then you’ll need to look at other options.
The Chapter 13 Bankruptcy Process
If you do meet the criteria and decide to file, there’s a certain process you’ll need to go through:
- Credit Counseling: Before filing, debtors must complete credit counseling from an approved credit counseling agency within 180 days prior to filing.
- Filing the Petition: The process begins with filing a petition with the bankruptcy court for your area. The filing includes several pieces of information that document your current financial situation.
- Repayment Plan: The debtor must file a proposed repayment plan detailing how they intend to pay off their debts. The plan must provide for fixed payments to the bankruptcy trustee, who will distribute the funds to creditors.
- Automatic Stay: Once the petition is filed, the automatic stay takes effect. This stops most collection actions against the debtor or their property.
- Confirmation Hearing: The bankruptcy court holds a confirmation hearing to determine if the repayment plan meets the requirements of the Bankruptcy Code and is feasible for the debtor. Creditors and the trustee can object to the plan.
- Making Payments: The debtor begins making payments according to the proposed plan within 30 days after filing the plan, even if it has not yet been approved by the court.
After completing all payments under the plan, the court will grant a discharge of the remaining eligible debts. Certain debts, such as domestic support obligations, some taxes, and student loans, may not be discharged.
Oklahoma City Bankruptcy Attorneys
Chapter 13 bankruptcy in Oklahoma City offers an option for individuals with regular income who wish to repay their debts while retaining their property. The process involves proposing a repayment plan, making regular payments to a bankruptcy trustee, and receiving a discharge of remaining debts upon completion of the plan. It provides significant benefits, including the ability to stop foreclosure, protect assets, and consolidate debts. If you’re considering filing for Chapter 13 bankruptcy, our bankruptcy team at OKC Attorneys can help. Call us today at 405-367-8710 or ask a question online.