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What do you need to know about Chapter 13 bankruptcy?

On Behalf of | Jun 2, 2023 | Bankruptcy |

If you are struggling with debt and looking for a way to repay your creditors without losing your assets, you may want to consider filing for Chapter 13 bankruptcy. Chapter 13 bankruptcy is a type of bankruptcy that allows you to reorganize your debts and pay them off over a period of 3 to 5 years, depending on your income and expenses.

Unlike Chapter 7 bankruptcy, which liquidates your non-exempt assets and wipes out most of your debts, Chapter 13 bankruptcy lets you keep your property and catch up on your missed payments.

Chapter 7 is not for everyone

Chapter 13 bankruptcy can be a good option for people who have a regular income and can afford to make monthly payments towards their debts, but need some relief from high interest rates, late fees or collection actions.

Chapter 13 bankruptcy can also help you avoid foreclosure on your home, repossession of your car or garnishment of your wages. However, Chapter 13 bankruptcy also has some drawbacks, such as higher fees, longer duration and stricter eligibility requirements than Chapter 7 bankruptcy.

How to qualify

To qualify for Chapter 13 bankruptcy in Washington, you must meet specific criteria. First, you must be an individual or a married couple filing jointly. Businesses cannot file for Chapter 13 bankruptcy. You must have a regular source of income that is sufficient to pay your living expenses and make monthly payments towards your debts.

You must have less than $419,275 in unsecured debts (such as credit cards, medical bills or personal loans) and less than $1,257,850 in secured debts (such as mortgages or car loans). These amounts are adjusted periodically for inflation. You must be current on your income tax filings for the past four years.

You must not have had a previous bankruptcy case dismissed within the past 180 days for reasons such as failure to comply with court orders or fraud. You must receive credit counseling from an approved agency within the six months before filing for bankruptcy.