Chapter 13 bankruptcy lets people with a steady income restructure their debts so that they can pay them off over time. Unlike other forms of bankruptcy, you may not be at risk of losing your assets in the process. The key is having your Chapter 13 bankruptcy attorney create a payment plan that works for you.
Do You Qualify for Chapter 13?
Not everyone can qualify for Chapter 13 bankruptcy. The most important requirement is that you have a steady income. That means you have to be an employee of a company, be self-employed, or run your own sole proprietorship business that makes a profit for yourself. Aside from this, you also have to have the appropriate tax filings with the IRS.
The key is that your income provides enough of a surplus (income – expenses except for the debt) for you to make payments toward a debt repayment plan. That income also has to be relatively consistent. If you own a business or are self-employed, there can be some variation in how much you make and when. However, you have to show a level of consistency in earnings and profit so that the court knows that there will be resources to put toward the payment plan.
Determining Your Surplus Income
Before you can do anything else, your Chapter 13 bankruptcy attorney has to determine how much of your income can go toward debt repayment. They start by figuring out your monthly income. If you have a steady job with a steady income, then your monthly pay is what they are looking for.
Then, they subtract all of your required expenses from that amount to see how much of your income is available. Any surplus income can be used to pay back debts. This will make your budget particularly tight while staying on the payment plan, but the advantage at the end of the term is that you are debt-free.
Negotiate a Debt Repayment Amount
Rather than bankruptcy simply erasing debt at the end of the process, your lawyer needs to try to negotiate the amount that you owe to each creditor down as much as possible. Many creditors are willing to accept less than what they are owed because they know that the debt will be forgiven in the end. Your lawyer can help reduce those amounts, making it possible to pay each creditor more than they would normally get from you if the situation never changed.
Getting Approval From the Court
Before customizing bankruptcy payment plans and executing them, your attorney must get approval from the court. The court wants to review the payment plan before making it legally binding to ensure that it is fair to all parties involved. Once approved, you must stick to it as much as possible. Violating the terms of the payment plan could mean that your bankruptcy can be voided, and you are left to deal with the debt on your own.
Work With Kain + Henehan to Create a Payment Plan
Getting out of debt can be easier if you have the right help and a good payment plan. Kain + Henehan, a bankruptcy attorney in St. Cloud, MN, can help you plan for and manage bankruptcy. Call Kain + Henehan, bankruptcy attorney in St. Cloud, MN, at (612) 438-8006 or fill out the online form so we can work through this process together.
