About Wage Earner's Bankruptcy
In 2005, the United States Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. One of the purposes of the act was to implement a means test as a prerequisite to declaring Chapter 7 bankruptcy, with the goal of reserving this sweeping form of debt relief to only those who truly needed it. If your income is above a certain level, you will not qualify for Chapter 7, but this does not mean that you cannot declare bankruptcy. Chapter 13 is commonly referred to as wage earner's bankruptcy, since it makes it possible for people who are still earning a reasonable income to get out from under the burden of an unsupportable debt load.
Eligibility for Chapter 13
Provided that your unsecured debts, such as credit cards and medical bills, are less than $360,475 and your secured debts, including a home mortgage and car loans, are less than $1,081,400, you should be eligible to file bankruptcy under Chapter 13. The primary characteristic that sets this type of bankruptcy apart from Chapter 7 is that it requires the individual to continue paying back his or her debts for a period of either three or five years. This does not mean, however, that you face up to five more years of the same types of money problems you now experience.
How Chapter 13 Bankruptcy Works
In a Chapter 13 case, all of your existing debts are lumped into a single monthly payment which is easier to manage than having to keep track of several due dates and minimum payments. Fortunately, you will not have to keep paying the same amount that you currently are. Your Gainesville bankruptcy lawyer will work with you to draft a repayment plan which leaves enough money for you to pay for your living expenses and to enjoy an acceptable standard of living. This is one of the most important reasons to hire an attorney to represent your case; an attorney has the legal knowledge and skill to get the court's approval for a plan of repayment that is more generous in what it leaves for your own use.
As soon as you reach the end of the repayment period, your remaining debts will be discharged, leaving you free to move into your life after bankruptcy. Don't think, however, that you will have to wait that long to experience relief from your creditors. As soon as you file your petition with the court, an automatic stay will be put in place to protect you from wage garnishment, repossession, foreclosure and other collections actions. If you have fallen behind on your mortgage, it may even be possible to include your missed payments in the repayment plan, which would give you three to five years to cure the mortgage. To learn more about Chapter 13 and begin working on your case, contact The Law Offices of Justin McMurray, P.A. now for a free case evaluation.