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Is Chapter 13 right for you?

There are a few distinctions between Chapter 13 bankruptcy and Chapter 7 bankruptcy that should be taken under consideration when you are deciding if either are right for you. Chapter 7 bankruptcy is considered liquidation bankruptcy, while Chapter 13 bankruptcy is "reorganization" bankruptcy. This distinction generally means that with Chapter 7 bankruptcy, one must turn over non-exempt property that you own. For Chapter 13 bankruptcy, you are setting a repayment plan based on your earnings, and you get to keep the property that you own. There are a few qualifying factors that you must fall within in order to qualify for Chapter 13 bankruptcy, however.

If your secured debts are higher than $1,010,650 or unsecured debts higher than $336,900, you will not be able to file for Chapter 13 bankruptcy. Secured debt is debt where the creditor is promised to take an item of property if the debt is not paid while unsecured debt does not have any items or property associated specifically with the debt.

In order to qualify for Chapter 13 bankruptcy, you must also prove that you have a constant income that is satisfactory enough to prove that you will be able to make regular payments. If your income is not consistent or is too low, you may not qualify. Before filing, you must also begin credit counseling from an agency approved by the United States Trustee's office.

If you qualify for Chapter 13, the courts will establish a specific repayment plan, taking all your debts into consideration. Determining whether you qualify and learning how the courts may establish your repayment plan is complicated; it may be in your best interests to speak with a legal professional to learn whether Chapter 13 bankruptcy is right for you.

Source: findlaw.com, "Chapter 13 Reorganization Bankruptcy," Accessed, May 9, 2017

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