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Who Can File for Chapter 13 Bankruptcy?

If you are struggling to pay off debt or keep up with monthly bills, you may consider filing for Chapter 7 or Chapter 13 bankruptcy. Under Chapter 7, all of your eligible assets are sold off to pay down your debt, and the remainder may be eliminated. But if you have a home you want to protect or make too much money to qualify for Chapter 7, you may want to consider Chapter 13 bankruptcy.

Known as the wage earner’s plan, Chapter 13 allows debtors with a regular income to restructure debt and pay it off over time, instead of liquidating assets. After consulting a credit counselor, you must submit a payment plan showing how you will repay creditors. The plan will prioritize secured debt – such as your mortgage and car payments – so that you continue to make those payments every month.

While the plan is in place, creditors are prohibited from attempting to collect funds from you, so the calls and letters to your home will stop. In fact, your consolidated monthly payment will go to a bankruptcy trustee, who will then distribute payments to your creditors. After three to five years (depending on your income), you will be debt free and able to spend disposable income on whatever you choose – not just bills and debt payments.

This may seem like an appealing option, especially if you want to prevent foreclosure on your primary home. But you must meet certain requirements to be eligible to file Chapter 13.

You must show that you:

  • Earn a regular income that is sufficient to cover monthly bills, such as utility bills, mortgage payments and car payments
  • Owe less than $383,175 in unsecured debt, such as credit card debt or medical bills
  • Owe less than $1,149,525 in secured debt, such as mortgages and car loans

In addition, although sole proprietors may file for Chapter 13 bankruptcy, corporations and partnerships may not.

Whether you are eligible to file for Chapter 13 or not, you should discuss your options with an experienced bankruptcy attorney who can advise you on the best course of action. If your mortgage lender has begun foreclosure proceedings on your home, time is of the essence. Once a foreclosure sale is completed, it is too late to save your home.

At the Law Offices of James C. Zimmermann, we take the time to explain your options when filing for bankruptcy, detailing the pros and cons of each chapter. Call us at 973-764-1633 or contact us online. We have offices conveniently located in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley, New Jersey.

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