Chapter 13 bankruptcy is one of the two main types of bankruptcy generally open to Louisiana consumers, the other being Chapter 7. Chapter 13 is also sometimes referred to as a wage earner’s bankruptcy because it is available to people who have a steady source of income but cannot keep up with their bills. Typically in Chapter 13 bankruptcy, the person’s debts are reorganized so that they can be paid down over a period of between three and five years.
Benefits of Chapter 13 bankruptcy
One of the primary parts of a Chapter 13 bankruptcy is the repayment plan, whereby the bankruptcy court determines how much the debtor can afford to pay toward debts after necessary living expenses are accounted for. The debtor is expected to dedicate all or nearly all disposable income to debt service, so Chapter 13 requires a no-frills lifestyle. The benefits, though, are that the debtor often gets to keep his or her home and other important assets, and any debts not paid by the end of the repayment period are generally discharged. Additionally, filing the petition to begin the case triggers an automatic stay of collections efforts, so creditor actions are immediately put on hold.
Qualifying for Chapter 13
In order for a person to qualify for bankruptcy under Chapter 13, he or she must have a source of reliable income and be current on tax filings. The debtor must also not have filed a Chapter 13 bankruptcy for the prior two years or a Chapter 7 for four years.
Chapter 13 initial filings
People must complete a credit counseling course within 180 days prior to filing their bankruptcy petition. Among the documents and other information that must be provided are proof of income, a list of creditors, the amounts of creditors’ claims, a list of real property owned or leased, a list of monthly expenses, and tax returns.