Filing a Chapter 13 bankruptcy under the United States Bankruptcy Code is a way for someone to repay his debts at a lower to zero interest rate. Chapter 13 lets a debtor repay creditors by using his future income. Therefore, filing bankruptcy under this chapter is an excellent option for a person who earns a steady income that allows him to make regular payments toward his debts.

Repayment Plans

In Delaware, Ohio, Chapter 13 allows the debtor to repay his creditors from three to five years. The debtor can keep his property while making the payments laid out in the debt repayment plan, which includes the amount and dates of the payments. The repayment plan has to be approved by the court-appointed trustee and the court.

Within 30 days, payments are made by the debtor to the trustee. In most cases, payments are eventually taken via wage withholding. Once the trustee receives the payments, he will pay the debtor’s creditors, with the most prioritized secured debts paid first. Afterward, a certain percentage of unsecured debt is paid. When the Chapter 13 plan’s terms are complete, the court discharges the remaining unsecured debt.

Chapter 13 Bankruptcy Eligibility

Not everyone is eligible for Chapter 13. A debtor cannot file Chapter 13 if his secured debts total over $1,010,650 and unsecured debts are more than $336,900. The debtor must also have proof that he filed three consecutive years of state and federal tax returns before the date of the bankruptcy filing. If the debtor is delinquent on his tax filings, the court may allow the debtor more time to file his tax returns before starting the bankruptcy proceedings.
In order to qualify for filing under this chapter, the debtor must earn enough income to pay according to his Chapter 13 plan after taking into account required secured debt payments and allowed expenses. To fund the Chapter 13 plan, the debtor can use a variety of income sources. If the debtor is unemployed, he can file by himself and use his spouse’s wages as an income source. Also, spouses may file jointly even if one spouse is employed and one spouse is not employed. Other income sources detailed by the federal bankruptcy law include:

Alimony.
Child support.
Disability benefits.
Pensions.
Property sale proceeds.
Regular wages.
Royalty payments.
Sales commissions.
Seasonal work income.
Self-employment income.
Social Security benefits.
Unemployment benefits.
Welfare payments.
Worker’s compensation benefits.

Adjustable and Payable Debts

The debtor can cure the arrears on his auto loan and mortgage under a Chapter 13 bankruptcy, allowing him to stop repossession and foreclosure. If the debtor has a second mortgage, it can be eliminated if the first mortgage’s payoff amount is more than the property’s fair market value. The debtor can also reduce the pay-off amount of his secured debts and nondischargeable debts like domestic support arrears and taxes.

If you are wondering if bankruptcy is for you, we invite you to contact us today for your free bankruptcy consultation!