When you are in debt, one of the practical ways that can help you get out of it is filing for bankruptcy in Louisiana. However, if you decide to go this route, it is essential for you to devise a plan that would make this process a success.
How repayment works
Chapter 13 bankruptcy is also known as the wage earner’s bankruptcy because this type of arrangement allows an employed individual with a regular income to repay his creditors over time through a court-approved plan. The debtor will propose a repayment schedule where he will commit all of his “disposable” income (the amount left after mandatory deductions) to the plan for a period of three to five years.
Secured creditors are given priority in repayment and are guaranteed payment in full of the value of their collateral. Unsecured creditors, on the other hand, may or may not receive payment in full under the terms of the debtor’s Chapter 13 plan.
For your Chapter 13 bankruptcy petition to be accepted by the court, you must:
- Prove that your income is regular and sufficient to support yourself and your dependents and can allow you to make payments under your proposed repayment plan
- Have unsecured debts that do not exceed $465,275 and secured debts that do not exceed $1,395,875
- File all required documents, including a list of your creditors, a schedule of your assets and liabilities, a statement of your current income and expenses
- Complete mandatory credit counseling from an approved provider within 180 days before you file for bankruptcy
If your petition is a success, a trustee will be appointed to oversee your case, and he or she will be responsible for collecting payments from you and distributing them to the people you owe as per the terms of your repayment plan. You will also be required to attend a meeting of creditors (also known as a “341 hearing”), where your creditors will have the opportunity to ask you questions about your bankruptcy petition and repayment plan.
Filing for Chapter 13 bankruptcy can be a difficult decision to make, but if you are struggling to repay your debts, it may be the best option for you. The court can forgive some of your debts if you adhere to your repayment plan every step of the way.