Some Connecticut residents may have questions about how chapter 13 bankruptcy works. Chapter 13 is a reorganization bankruptcy, so it may be the right solution when an individual has a good income but is not able to pay off their creditors immediately. Chapter 13 bankruptcy will last for a period three or five years, giving an individual the opportunity to pay their debts off over an extended time.
The Chapter 13 process begins with an individual receiving credit counseling from an agency that has been pre-approved. After the credit counseling is complete, a person can file for bankruptcy. Then, the individual filing for bankruptcy, along with a court-appointed trustee, will create a repayment plan that allows them to clear out their debts. The length of time a person will need to clear out their debts will vary based on their income.
The courts will decide whether a person gets three years or five years to complete Chapter 13 bankruptcy. In making this determination, the court will compare a person’s income with the amount they owe. This is then compared to the medium income in the state. Once the payment plan is complete, bankruptcy is discharged, and any debts that are left remaining are erased.
There is not an income limit for filing chapter 13. However, there is a debt limit. In order to file Chapter 13 bankruptcy, debt cannot be more than $394,725 if it is unsecured or $1,184,200 if it is secured debt.
If an individual is considering filing for Chapter 13 bankruptcy, they may wish to discuss the case with a bankruptcy lawyer. A lawyer may provide their clients advice as they go through the bankruptcy process, including letting their clients know if filing for bankruptcy is the best option for them. The attorney may explain the bankruptcy process and answer questions that their clients have about procedure or paperwork.