When it comes to qualifying for Chapter 13 there are limits, but at the upper income level. In other words, if your income is in the six-figure range, often Chapter 13 won’t apply. If you have a very large amount of unsecured debt or a secured debt, there are some limits, which are adjusted annually with the rate of inflation, which means 90% of the population will be able to qualify for a Chapter 13.
To qualify for Chapter 13, a debtor has to have to have some sort of a steady income, which usually means they’re employed. It’s possible to qualify with income from other sources, but the idea is that the debtor will enter into a repayment plan, with a budget and a budget surplus at the end of each month and that surplus will go to paying back creditors. Showing “disposable income is necessary to get the Chapter 13 plan confirmed by the judge
Who Should File for Chapter 13?
People who have some sort of a significant asset that they want to hold on to, even if they are unable to make their monthly payments and are probably behind. Usually, Chapter 13 is not for people who are just a little behind on payments, but rather, those are having trouble keeping up with the monthly payments on whatever debts they have.
In most cases, the person filing Chapter 13 has a house that they want to hold on to, or they may be falling behind on the mortgage. However, they must have a job and an income large enough to be able to restructure their debt and make payments over a period of time. Chapter 13 is best for people who are either facing foreclosure or if they are behind on the mortgage payments and they see foreclosure coming.
Many people have a first mortgage and a second mortgage. If they are upside down in their mortgage, meaning their house is worth less than the balance of first mortgage, they may be able to do what is called “lien stripping” with Chapter 13, which means they can essentially “strip” the second mortgage away from the first one, and essentially removing the lien from the property. Doing that doesn’t mean you no longer owe the debt, but that it will be treated the same as other unsecured credit, like credit cards and medical bills. That can also be a huge help to those in such a situation.
How to Rebuild Credit after Filing for Bankruptcy
Many who file for bankruptcy often notice that immediately after filing, they receive a ton of credit offers in the mail. That may sounds counterintuitive, but by filing for bankruptcy, the debtor has demonstrated that they’re less of a risk. While they couldn’t pay their debt back, creditors also know they can’t declare bankruptcy again for a certain period of time, so they get lots of credit offers with high interest rates, including car loans and credit cards.
You can use those and repay them on a monthly basis in a responsible way, and you can continue to build up your credit and get it back to where it was, or even improve it to even better than it was before you filed bankruptcy.
Chapter 13 bankruptcy also helps by allowing you to make monthly payments to catch up on your debts, thereby demonstrating to credit bureaus that you are able to keep up. Like anything else, building up credit take time and patience, but you can get the credit to a better place.
What Happens to Co-Signers in a Chapter 13 Bankruptcy?
Assuming they are also filing for Chapter 13, co-signers will also be joined on the bankruptcy, and they will be treated the same way as you. But if you have a co-signer that isn’t filing bankruptcy, then the debt will continue on in their name, while you will be taken off of it. For instance, if you have a car loan and you have a co-signer on the car loan, you will be off of the car loan, but the lender will retain the lien on the car and the co-signer will remain liable for the debt.
On a Chapter 13, Can I Be Still Get Sued or Have My Wages Garnished?
One of the main reasons people file for bankruptcy protection is to stop that from happening, because it works. When you file for bankruptcy, whether Chapter 7 or Chapter 13, an automatic stay that goes into effect, and that prevents creditors from taking any legal actions against you, including suing you, garnishing your wages, or even contacting you about a loan.
Everything has to go through the bankruptcy trustee from the moment you file, with the trustee acting as something of a referee between you and your creditors. Nobody will be able to garnish your wages or anything like that without going through the bankruptcy court.
For more information on Qualifying For a Chapter 13 Bankruptcy, please call (801) 441-2013 today to schedule a free initial consultation. Get the information and legal answers you’re seeking.