What Are the Debt Limits for Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is used to reorganize debt, which means that you will have a limit on the unsecured and secured debt that can be discharged with this legal process. For example, the debt limit for unsecured debt is around $400,000, while the debt limit for secured debt is up to $1 million. The debt limits for this type of bankruptcy will ensure that you can keep certain assets or properties that are exempt from these limits. You will likely need the assistance of a lawyer who specializes in bankruptcy to help you understand which of your debts qualify for these debt limits and exemptions.

Other Requirements for Chapter 13

In addition to debt limits, Chapter 13 also has other requirements that filers must meet. For example, filers must have a regular income and they must be current on tax filings. For this reason, it is usually most convenient to wait to file bankruptcy until after you have filed the current year's taxes, as this information will be used as part of the financial disclosures involved in your bankruptcy paperwork.Other requirements include not having any other Chapter 13 filings in the past two years or any Chapter 7 filings in the past four years. Additionally, you cannot have filed any other type of bankruptcy petition in the last 180 days that was dismissed by the court.

Why Choose Chapter 13 Bankruptcy Instead of Chapter 7?

While Chapter 7 bankruptcy is used to liquidate overwhelming debt, Chapter 13 is used to reorganize secured and unsecured debt. There are a few reasons why you may want to choose Chapter 13 over Chapter 7. For example, choosing Chapter 13 can allow you to catch up on certain debts, such as a mortgage for a house or an auto loan. Some other reasons to choose Chapter 13 include:

Your Income Is Too High for Chapter 7

To qualify for Chapter 7 bankruptcy, you must be able to pass a means test, which is a ratio calculated between your debt and your income. Essentially, the means test proves that you are unable to reasonably pay for your debts because you do not have enough disposable income. However, if you are unable to pass the means test for Chapter 7 bankruptcy, you will need to file for Chapter 13. This is why people who have higher incomes choose Chapter 13 bankruptcy instead.

You Want to Retain Certain Assets

When you file a Chapter 13 petition for bankruptcy, you will list all of your debts, assets, and properties. By filing for Chapter 13, you will be able to keep certain exempt properties and assets, such as a home or vehicle. When you retain assets, you are agreeing to pay for any debt you owe on that asset.

You Want a Shorter Mark On Your Credit Report

Another reason people may choose to file Chapter 13 is that it leaves a shorter mark on their credit report. Chapter 7 bankruptcy will remain on your credit report for up to 10 years, while Chapter 13 will only remain on your credit report for seven years. This can make a huge difference for future plans, particularly if you want to start a business, purchase a house, or improve your credit score.

How Do You File for Bankruptcy?

To file for bankruptcy, you will need to complete several steps. Your first step is contacting a bankruptcy lawyer who will walk you through the process, help you collect relevant documents, and ensure that you follow all steps required by those who file for bankruptcy in Kansas. Some specific steps you will need to follow include:

Gather Financial Documents

Because bankruptcy is a legal process that helps you discharge or reorganize your debts, much of your paperwork will be focused on financial documents. You and your lawyer will need to go over documents such as your bank account information, a list of creditors you have, and your tax returns. All of this information will be used to fill out the schedules on your bankruptcy paperwork so that the bankruptcy court can understand your financial situation.

Stop Payment on Qualifying Debts

When you file for bankruptcy, it's often a pragmatic step to stop paying qualified debts. Although you should continue paying for assets you plan to keep, such as a mortgage, you must stop payment on debts that you plan to discharge or reorganize.

Learn About Property Exemptions

You will also need to learn about property exemptions. In Kansas, the property you intend to keep becomes an exempt property that you will need to pay for in your Chapter 13 repayment plan. Some property exemptions in Kansas include the Kansas Homestead Exemption, which protects the value of equity in your home. Kansas also has a Motor Vehicle Exception, which protects up to $20,000 and equity on a motor vehicle that you use to get to work. Other exemptions may include certain personal property such as clothing, earned income tax credits, burial plots, furniture, and alimony.

Take Credit Counseling and Debtor's Education

Part of the bankruptcy process includes taking a credit counseling course before you submit your bankruptcy documents and taking a debtor's education course before your bankruptcy is processed and discharged.

Both of these courses can be taken through online classes or in-person seminars. The certificates from these courses will need to be filed with your bankruptcy district court. If you do not take these classes, your bankruptcy will be dismissed.>

Attend the 341 Creditor's Meeting With Your Lawyer

The final step before your bankruptcy is discharged is attending the 341 Meeting with your lawyer. The 341 Meeting is usually quick and will require you to make an appearance at the courthouse. If you do not attend this meeting, your bankruptcy will be dismissed.

How Can Bankruptcy Lawyers Help You?

A bankruptcy lawyer can be useful when you plan to file bankruptcy. This is because there is a considerable amount of paperwork that needs to be completed and filed with the court. Additionally, the schedules used for bankruptcy paperwork are often complicated, so it can be helpful to have guidance from a lawyer to ensure that all these documents are correctly filled out.

When Will Your Debt Be Discharged?

For Chapter 13 bankruptcy, your debt will generally be discharged at the end of your repayment plan. Most repayment plans can be completed within three to five years based on how the court calculates your monthly payments. The immediate benefit of filing a bankruptcy petition with the help of a lawyer include the ability to end creditor harassment and stop the foreclosure process on a home. When you file for bankruptcy for Chapter 13, you're agreeing to create a debt repayment plan to pay off certain debts you want to retain. Please contact Stockton & Kandt, LLC today to learn more about how to file bankruptcy in Kansas.