You may have had credit card debt pile up while you were unemployed. There are many, many reasons why your debts may become more than you can manage each month. If you realize you cannot meet all of your monthly obligations, and the situation is not going to get better any time soon, it is time to consider Chapter 13 bankruptcy. This is known as a reorganization bankruptcy. Through a payment plan, you can pay off all or most of your debts. After a few years, you could be in a much better financial position than you were before the bankruptcy process.
If you are interested in learning whether this type of bankruptcy is right for you, do not hesitate to call us at The Law Group of Northwest Arkansas PLLC to speak with a Fayetteville, Arkansas Chapter 13 bankruptcy lawyer. While we are located in Northwest Arkansas, our firm serves clients throughout the state of Arkansas, and our attorneys are also licensed in Missouri, Oklahoma, Tennessee, and Virginia. You can reach us via our online contact form or by calling (479) 316-3760.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is essentially a court-approved and supervised payment plan. Chapter 13 recognizes that you have a stable income, and some disposable income each month to pay your debts, but you cannot manage it all on your own.
Through the bankruptcy, a stay is put on your debts. A “stay” means creditors can no longer call you or send you letters. They cannot harass or hassle you to pay your debts. Things are put on pause while you sort out a payment plan. This can be extremely helpful when you want to keep your home and vehicles. Chapter 13’s automatic stay can enable you to catch up on mortgage or auto loan payments. You may also be able to refinance for more manageable payments. Unlike with Chapter 7 bankruptcy, which requires liquidating your unexempt assets, Chapter 13 enables you to keep all of your property.
Once the court approves your payment plan, you must abide by that plan for the next three to five years. When you have completed the terms of the plan, you are discharged from liability for your debts. You will have either paid off your debts completely, or some unsecured debt may be forgiven.
Like with all types of bankruptcy, there are secured debts that cannot be discharged. Depending on the types of debt you accumulated before filing, you may still have secured debts you are responsible for after your Chapter 13 bankruptcy is completed, such as your mortgage, auto loans, and federal student loans.
Eligibility for Chapter 13 Bankruptcy
If you are interested in filing for Chapter 13 bankruptcy, you need to determine if you are eligible to do so.
If you filed for Chapter 7 or Chapter 13 before, then you must wait a certain period of time before filing again. If you had debts discharged in a Chapter 7 bankruptcy, you must wait at least four years before filing a new Chapter 13. If your debts were handled in a previous Chapter 13 bankruptcy, then you must wait at least two years before filing again. Since most Chapter 13 bankruptcies last three to five years, you may technically be eligible to file again right away.
Or, if your previous Chapter 13 bankruptcy was dismissed because you could not complete the payment plan, then you often can file for another Chapter 13 right away. However, you should speak with an Arkansas Chapter 13 bankruptcy lawyer located in Fayetteville to determine when a second bankruptcy can be filed.
If you have little to no income, you may qualify for a Chapter 7 bankruptcy. That is the type of bankruptcy that is known to wipe the slate clean quickly. However, if you have too much monthly income or too much disposable income each month, then you may be eligible for Chapter 13.
For a Chapter 13 bankruptcy, you must have consistent income. If your wages are off and on, such as if you are a freelancer or seasonal worker, this may not be the right option for you. Next, you must have sufficient disposable income. This means you have money left over every month after you pay your necessary bills, like housing, utilities, and groceries.
Additionally, your debts cannot be over the limits determined by federal law. All of your unsecured debts cannot be more than $394,725. This usually includes medical bills, credit card bills, personal loans, and past due utility bills. Secured debts must be less than $1,184,200. These include any debt with a specific property attached to it, including your mortgage and auto loans. These amounts change periodically, so it is useful to have an attorney on your side when making decisions regarding bankruptcy.
To have an experienced Fayetteville, AR Chapter 13 bankruptcy lawyer review your eligibility, call us right away for a free consultation.
We Can Guide You Through This Legal Process
Bankruptcy is a legal process. In order to go through bankruptcy, you must file the proper paperwork in the correct federal court. In Arkansas, there is a U.S. Bankruptcy Court for the Eastern District and Western District. If you live in Fayetteville, you would file in the Western District.
To file, you must complete the proper petition and include with it the necessary financial information. These are initial documents that demonstrate your eligibility. You must also pay a filing fee, which is usually a few hundred dollars.
Once you have filed, there is an automatic stay placed on all of your debts. Also, the court assigns a bankruptcy trustee. Next, your creditors are sent notices that you filed for a Chapter 13 bankruptcy.
Between filing and your meeting with the trustee and creditors, your bankruptcy lawyer will make sure the trustee has all of your most recent financial documents, including your recent tax returns.
For a Chapter 13 bankruptcy, you can expect to attend a few court hearings over the years. You must also meet with the trustee and attend a 341 Meeting of Creditors. At the meeting of the creditors, you meet with the trustee and answer their questions. Creditors are entitled to show up to this meeting, and some may, although it is not uncommon for no creditors to appear. The purpose of this meeting is to review your financial information and verify your identity. Having an experienced attorney, like one from the Law Group of Northwest Arkansas PLLC, can help you navigate this process and feel prepared for hearings and creditor meetings.
With the help of your Fayetteville, Arkansas Chapter 13 bankruptcy lawyer, you will propose a payment plan. This plan will outline how much money you can provide each month to go toward your debts for the next three-to-five years. Your bankruptcy trustee will review the plan and either approve of it or disagree. If your trustee objects to the plan, it can be modified, and negotiated by your attorney. Usually within 30 days of filing, a plan is approved by the court, and you begin making payments.
Creditors are allowed to object to the bankruptcy prior to your confirmation hearing. The court will address any objections or concerns the creditors or trustee has, and your attorney will advocate for you during this process.
Moving forward, you send your payments to the trustee. The trustee ensures the proper creditors are paid. Every year, you provide the trustee with updated income and expense statements. Your trustee will provide you with periodic statements regarding which creditors have been paid and how much.
Once you complete the payment plan and all other requirements, then you can return to court to be discharged from the bankruptcy, and possibly have some remaining unsecured debts discharged as well.
Federal Bankruptcy Laws Require You to Go Through Debt Counseling
There are many steps you must go through to complete a Chapter 13 bankruptcy. It is more complicated and a much longer process than a Chapter 7 bankruptcy. However, for both types of bankruptcy, you must also complete debt counseling.
Within the six months before you file a Chapter 13, you must complete a federally approved credit counseling session. This must be done before you can file.
After you file for bankruptcy, but before you can be discharged, you must complete a personal financial management course. You may also see this called a pre-discharge debtor education or debt management course.
The purpose of these courses is to educate you regarding finances and debt, help you better manage your money, and help you avoid acquiring too much debt in the future. Call an Arkansas Chapter 13 bankruptcy lawyer located in Fayetteville to learn more about this required debt counseling.
Do You Think Chapter 13 Bankruptcy Is Right For You?
If you believe you may be eligible for Chapter 13 bankruptcy, and it may be right for you as an individual or for you and your spouse, contact us at The Law Group of Northwest Arkansas PLLC. We are here to talk with you about Chapter 7 and Chapter 13 bankruptcy, including the possible benefits and the challenges. We will review your eligibility for Chapter 7 and 13 bankruptcy. If you can file Chapter 13 and you want to, we will carefully guide you through the entire legal process. To schedule a free initial consultation, call us at (479) 316-3760 or use our online form.