Chapter 13 bankruptcy in Florida is also referred to as Wage Earner’s plan. It allows people with regular income to generate a plan to repay their debts. This chapter allows debtors to extend a repayment plan to make regular installments to the creditors over the course of a specific period (three to five years).
If the debtor’s income is less than the applicable median, then the plan will be valid for three years unless a longer period is provided by the court. If the income is higher than the applicable state median, this plan can be five years long. In no case will be the plan extended over the five year period.
How Chapter 13 Functions?
Chapter 13 commence by filing a bankruptcy petition in the court where the debtor resides. The debtor must file certain document including –
- Assets and liabilities schedules.
- Latest income and expenditure schedule.
- Executory contracts and unexpired leases.
- Statement of finance.
The debtor should also submit a certificate of credit counseling along with a copy of the debt repayment plan and income evidence. The individual should also offer the trustee a copy of the tax return.
A couple can file a joint petition. The court typically charges a case filing fee of USD 235 and USD 75 as a miscellaneous administrative fee. The fee is paid to the clerk during the filing; however, if the court grants permission, the debtor can pay the fees in installment.
Once a debtor has filed a petition of Chapter 13, the court appoints a trustee to administrate the case. The trustee assesses the case and acts as an agent who collects the payment from the debtor and distributes it to creditors. While a majority of the collection action is stopped after filing Chapter 13, some debt collection action remains open.
During the stay period, collectors cannot take any action against debtors. Additionally, unless creditors have the authority from the court, they cannot take collection action against the co-debtor as well. The stay also protects the debtor’s home from foreclosure.
Eligibility for Chapter 13
Any individual inducting self-employed or owner of the unincorporated business is eligible to obtain the benefits of Chapter 13. However, the unsecured debt should less than USD 394, 725, and the number of secured debts should be less than USD 1,184,200. A partnership firm or corporation is not eligible to become Chapter 13 debtor.
Furthermore, an individual cannot access this relief plan if, during the bankruptcy proceeding of 180 days, a petition was dismissed due to the willful failure of the debtor to make an appearance on the court or comply with orders.
An individual cannot be a debtor under Chapter 13 unless with the 180 days of filing bankruptcy acquired credit counseling from a certified counseling agency.
Benefits Offered by Chapter 13
Chapter 13 essentially allows an individual to protect their home from foreclosure in case of bankruptcy. Filing under this chapter, a person can stop the seizing proceeding may remedy aberrant mortgage payment in a specific time period.
During the time when Chapter 13 is in effect, the individual has to make full repayment of the mortgage that is due. Furthermore, Chapter 13 allows people to reschedule their secured debts and extend them over the course of life of this plan. This lowers the overall payment.
Chapter 13 encompasses a special provision that safeguards third parties who are co-signer of the debts.
This plan works as a consolidation loan in which a person makes repayment the plan’s trustee who, in turn, distributes the amount to the creditors. The debtor will not have any direct contact with his or her creditors.