Debt Relief

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Bankruptcy FAQ

Chapter 13 may offer debt relief for Louisianans with regular income

Chapter 13 bankruptcy may offer a debt relief option for those who do not qualify for other filing Chapters, or who wish to protect their assets.

Many people in Louisiana may be struggling with debt, but not be willing to liquidate their assets. For them, and others who do not qualify for Chapter 7, filing for Chapter 13 bankruptcy may be an effective debt relief solution. Through Chapter 13 filing, people generally pay back all, or a portion, of their debt through a repayment plan that spans over three to five years.

Benefits of Chapter 13 bankruptcy

There can be a number of benefits to filing for Chapter 13 bankruptcy, over other Chapters. Essentially, a Chapter 13 filing provides debt relief by serving as a consolidation loan, according to the U.S. Federal Courts. Rather than negotiating and making payments to each of their individual creditors, people under Chapter 13 protection make payments to a court-appointed trustee who disburses the appropriate amounts to creditors. In some cases, this may allow people to reduce their payment amounts.

Additionally, Chapter 13 may allow people to restructure their secured debt payments, with the exception of mortgage loans for primary residences. However, filing under this Chapter may stop foreclosure proceedings. This may offer people the opportunity to save their homes, if they are able to make all of their mortgage payments that come up in full while they are under Chapter 13.

Who is eligible for Chapter 13 bankruptcy?

In general, Chapter 13 bankruptcy may be available to individuals and couples. While those who are operating unincorporated businesses, and the self-employed, may be eligible, corporations and partnerships cannot seek this type of relief.

In order to qualify for Chapter 13 bankruptcies, the unsecured debts and secured debts of the people, or couples, filing must be under specified amounts, according to the U.S. Federal Courts. The limitations on debt amounts are regularly adjusted to account for changes to the consumer price index. Currently, filers cannot have unsecured debts in excess of $383,175. Their unsecured debts must be under $1,149,525.

Starting the process

Chapter 13 bankruptcies are typically started when a petition is filed with the court and any fees are paid, according to the U.S. District Court for the Western District of Louisiana. Documentation, including the tax returns of those who are filing, an accounting of their expenditures and their income, and a record of their liabilities and assets, must be included in the petition. Filing a petition for Chapter 13 bankruptcy protection automatically enacts a stay of most collection actions for the duration of the case or protection.

Creating repayment plans

With few exceptions, people must include a plan for repaying their debts with their Chapter 13 petitions, or submit one within 14 days of filing their petitions. These plans must be approved by the court and should specify a payment amount, and the frequency with which payments are to be made. Payment amounts may be based on a number of factors, including the disposable incomes of those filing. According to the U.S. Federal Courts, such plans must also lay out the terms for repaying creditors based on the debt size and type of each claim.

Seeking legal counsel

Although there are a number of advantages to filing for Chapter 13 bankruptcy, it may not be the right option for every situation. In order to help determine which bankruptcy Chapter is best for their circumstances and needs, many people choose to work with an attorney. An attorney may also help prevent denials for mistakes by ensuring that all of the necessary documentation is filed properly.  Each case is different and results may vary.