There are many types of bankruptcy options for people who find themselves in overwhelming debt.
Definition Ch 13
A Chapter 13 Bankruptcy can help you prevent a house foreclosure and make up missed car or mortgage payments and more. All the debtor needs to do is propose a 3 to 5 year repayment plan. The plan must show how you will pay off all or part of the debt from your future income. Debtors can only file a Chapter 13 Bankruptcy if they have a regular source of income and sufficient disposable income.
Chapter 13 Costs & Payment Plan
Your disposable income and assets or property that is exempt or partially exempt will determine the amount to be repaid. Other things such as secured debts, late house payments, tax liens and car payments also determine how much you pay each month. The total amount that you repay should at least be as much as you would have paid creditors had you filed a Chapter 7 Bankruptcy. You will need to stick to the terms of repayment agreement for all your dischargeable debt to be released at the end of the plan.
Filing Chapter 13 Bankruptcy
Debtors that want to keep their house or car or other secured assets with enough equity can file a Chapter 13. A Chapter 13 is reorganization while a Chapter 7 is liquidation. You can file a Chapter 13 bankruptcy for the following reasons:
When you want to stop tax levies or garnishment to allow you to repay taxes interest free for 3-5 years
You earn high income and have not passed the Chapter 7 means test
You received a discharge in a Chapter 7 case in the last 8 years
You have not filed a Chapter 7 or Chapter 13 in the past four years
With a Chapter 13 bankruptcy you can make up all your overdue payments overtime. It allows you to reinstate the original agreement. If you want to eliminate your entire heavy debt burden without paying any of it, a Chapter 7 bankruptcy is a better option. A Chapter 13 is mainly for people who have valuable and non-exempt property, which they want to keep.
Chapter 13 Bankruptcy Eligibility
There are a number of requirements for you to be eligible for a Chapter 13 bankruptcy. They include:
Your secured and unsecured debts should not exceed certain amounts.
You must prove to the court that you can afford to meet both your monthly household obligations and pay into the repayment plan
You must have received credit counseling within 180 days before filing
You must have not had a prior bankruptcy petition dismissed because you failed to appear in court or failed to comply to the court’s orders within the preceding 180 days
A company or business cannot file a Chapter 13 bankruptcy, only an individual can do this. You need to consult an experienced attorney that can give review your case and help you determine what debt relief option is appropriate for you.
A Chapter 12 bankruptcy provides relief for people in partnerships classified as “family fishermen” or “family farmers”.
The Chapter 12 Bankruptcy
It is a plan that is established to pay debts over the course of a three and five year period. Chapter 12 bankruptcy provides a higher debt ceiling because farmers and fishermen usually incur much higher debts than the average wage-earner. A Chapter 12 bankruptcy is similar to Chapter 13 bankruptcy but Chapter 12 bankruptcy has more benefits for debtors. “Family farmers” and “family fisherman” can avoid foreclosure and liquidation by filing a Chapter 12.
First, you the debtor, has to file a voluntary petition for relief. A bankruptcy trustee will be assigned to the case, and the trustee will focus mostly on monitoring the debtor’s operations and review documents. A trustee is also supposed to advise the court and collect and disburse payment. Debtors only have 90 days from the date that they file bankruptcy to propose a repayment plan. They may request the court to extend the time in certain special circumstances.
A trustee reviews the payment plan proposed by the debtor and makes recommendations to the bankruptcy court. The minimum period for a repayment plan is three years but the debtor can pay all debts sooner than that. A court approval is needed for the plan to be extended to five years. If a debtor’s repayment plan is not confirmed or if the debtor cannot make required payments, the Chapter 12 case can be dismissed.
Does your Farming or Fishing Business Qualify?
There is criteria that a farmer or fisherman must meet to file for a Chapter 12 Bankruptcy. This includes:
You must be actively participating in your fisherman or farmer operation
Your farming or fishing operation must have raised over 50% of your gross income for the preceding tax year
Your fishing or farming operation must be responsible for 80% and over of your fixed-amount debts
The total amount of your unsecured and secured debt of your fishing or farming operation shall not be more than $3,237,000
Husband and wives can file a single joint petition but a partnership can file corporately. However, partnerships need to meet the following additional criteria:
No publicly traded stock can be issued by the farming operation
One family must own more than 50% of outstanding stock or equity in the partnership
Family owning over 50% must conduct actual farming
Filing Chapter 12
After you file for bankruptcy for a farming operation, you will remain in control of your farm. That means that you will control the day-to-day operations of the farming operation. The court-appointed trustee’s role will be to make recommendations regarding Chapter 12 dischargeability, exchanging information with interested parties, verifying that the debtor is able to make payments on time.
No one wants to go through a situation where they have to file for bankruptcy. You will need an experienced bankruptcy lawyer to help you navigate the many potential pitfalls of a Chapter 12 bankruptcy.