Who’s a Good Candidate for Chapter 13 Bankruptcy?

Who’s a Good Candidate for Chapter 13 Bankruptcy?Whether you have recently divorced, lost a job or business, became sick, or suffered some other kind of significant financial setback, you may have accrued substantial amounts of debt. In these situations, chapter 13 bankruptcy may be a potential option for you.

Chapter 13 bankruptcy is referred to as a “wage earner’s plan,” meaning that residents of Knoxville who have income flowing in and can eventually pay part or all of their debts off may be eligible to file for it. If they apply for Chapter 13 bankruptcy and are approved, they are typically given three years to fully pay off their debts; in some situations, it may increase to five. You may be a strong candidate for Chapter 13 bankruptcy if:

  • You are a full-time hired worker, self-employed, or even own your own unincorporated business with steady income flowing in each month.
  • You simply need a little help or guidance to pay off your debts.
  • Your unsecured and secured debts added together equal less than $2,750,000.
  • You have filed and are up to date on your taxes.
  • You have received or participated in credit counseling provided by an approved agency.

In order to be eligible to file for Chapter 13, you must be able to show that you can pay off your debts with your monthly income within a few short years if given this extended time period.

A hypothetical example of when Chapter 13 bankruptcy may help

Sally and Tommy fall behind in their mortgage payments because they are both temporarily out of work. The bank that handles their mortgage decides to pursue foreclosure, but Sally lands a job and starts work around the same time that the bank files. Tommy goes back to work shortly thereafter.

Sally and Tommy file for Chapter 13 bankruptcy, because their salaries are enough to pay off their debts under the reorganization plan. This stops the potential foreclosure and allows them to stay in their house; it also allows them to keep their more valuable possessions, like their cars, while they get themselves back on track.

Who is not eligible for Chapter 13 bankruptcy?

You may not be eligible to file for Chapter 13 bankruptcy if:

  • You do not have enough income or monthly wages to cover the debts.
  • You cannot pay off the debts within three to five years.
  • You are behind on your taxes and have not met the tax filing deadlines.
  • Your unsecured and secured debts are over the $2,750,000 limit when added together.
  • You have had another bankruptcy petition dismissed within the 180 preceding days because you failed to appear in court, follow the orders, or the petition was voluntarily dismissed after property was recovered.
  • You never received or participated in credit counseling provided by an approved agency.

Will filing for Chapter 13 bankruptcy affect my divorce?

When couples decide to get a divorce, financial hardships usually follow. Sometimes, they may be able to work together to develop a plan to handle their financial problems, while other times, they may be unable to come to a solution on how to solve these issues. As a result, they may decide to file for Chapter 13 bankruptcy. While bankruptcy may be able to help reduce and pay off certain marital debts, it is important to know and understand that filing for bankruptcy can and most likely will delay your divorce. The reason for this is because the Court will wait for the bankruptcy proceedings to take place first.

Bankruptcy can also delay important parts of your divorce proceedings, such as child support payments, alimony, and marital property division. As attorneys who represent folks in bankruptcy proceedings AND in divorce proceedings, we are uniquely positioned to help you in this scenario. We can look over the facts and details of your situation and help you find every possible option to relieve your debts, while also ensuring that you are still progressing through the divorce. A Knoxville bankruptcy attorney from LaFevor & Slaughter can also help you decide whether it is best for you and your spouse to file for joint or individual bankruptcy.

Three other reasons to work with a bankruptcy lawyer in Knoxville

  1. We know the ins and outs of the legal process: Our Knoxville Bankruptcy lawyers are fully aware of the legal process and everything that it entails. Therefore, if this is your first time filing for bankruptcy, you can depend on a legal professional to guide you through the entire process and ensure that you understand each step along the way. Filing without any legal help can put you at risk of missing a deadline or forgetting to turn in an important document, which could cause your bankruptcy to take even longer.
  2. We will communicate with and handle creditors: There is a good chance that you have creditors constantly calling you. Their job is to get money and collect any debts that you owe. While this is understandable, it does not mean that it is not aggravating or annoying. As a result, you may find yourself continuously avoiding your phone, emails, and even your mailbox. However, if you work with one of our bankruptcy attorneys, we will handle all communication with creditors, which will reduce the harassment that you are experiencing and make the process a lot less intimidating for you. We can ensure that all creditors abide by the automatic stay.
  3. We can possibly help you save money: Our chapter 13 bankruptcy lawyers in Knoxville know how to negotiate with your creditors, file all necessary paperwork, and represent your best interest at any hearings. If you are worried about paying more in legal fees, you may actually be able to save money as your attorney will help you navigate the bankruptcy process a lot more efficiently than if you handled it on your own. In addition, we will ensure that you do not make any errors that could heavily cost you in the end.

If you are thinking about filing for bankruptcy and need assistance, please do not hesitate to reach out to a Knoxville bankruptcy lawyer from LaFevor & Slaughter at your earliest opportunity. Our attorneys are experienced, skilled, and knowledgeable when it comes to bankruptcy. Therefore, if you hire our team, we will happily take the stress and burden of the bankruptcy process off your plate while also supporting and guiding you through the steps to gaining financial stability again. Call our office or fill out our contact form to schedule your consultation to begin discussing your situation today.