Many Americans are familiar with Chapter 7, or liquidation bankruptcy, thanks to its prevalent appearances in popular culture. However, some Kentucky residents facing debt problems may be unaware that other bankruptcy options are available to them. One of the most popular is Chapter 13 bankruptcy, which differs from Chapter 7 in several important ways.
In general, a Chapter 13 filing is considered a debt reorganization plan, rather than a liquidation proceeeding. Filing for Chapter 13 involves the creation of a plan wherein a debtor is able to repay their loans to creditors inside of a set period of time, typically three to five years. In fact, Chapter 13 is so common, it is second only to Chapter 7 in cases of personal bankruptcy filings. Small business filings are typically handled through Chapter 11.
Chapter 13 is sometimes known as a wage earner's bankruptcy, because proof of a regular income is required for anyone who wishes to declare it. The court requires proof of income as well as updated tax returns in order for a filing to proceed. The amount of debt carried also plays a role: both unsecured (e.g. credit card, student debt) and secured (e.g. car loans, mortgages) debts cannot exceed a set amount, depending upon applicable state and federal laws. Ultimately, the role of Chapter 13 is to help wage-earning filers avoid losing major assets like vehicles or homes.
A Chapter 13 bankruptcy plan must be approved by the Bankruptcy Court, and there are a variety of steps to the process that can become quite complicated to the uninitiated. This is why the support of a dedicated bankruptcy attorney can be so valuable for an individual or family in Kentucky seeking to file. With the support of such a professional, the ins and outs of bankruptcy filing can be handled more quickly and efficiently, putting filers back on the road to financial stability in a shorter period of time.