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What is the process for a Chapter 13 bankruptcy?

Kentucky residents who are looking to file for bankruptcy will generally either select a Chapter 7 or Chapter 13 filing. While a Chapter 7 bankruptcy focuses on eliminating debts, this type of filing is usually unable to prevent foreclosures. Chapter 13 gives people a way of catching up on debts, including secured loans, with a three- to five-year repayment plan, and in some cases the debtor can save the home from foreclosure if regular mortgage payments continue to be made. This process also can protect cosigners from action by creditors.

To be eligible for a Chapter 13 bankruptcy, an individual can have no more than $383,175 in unsecured debts and no greater than $1,149,525 in secured debts. These numbers are periodically adjusted based on changes in the consumer price index. Individuals must also have completed credit counseling within 180 days prior to filing for Chapter 13 bankruptcy.

Part of the filing process involves providing the court with a wide range of documentation about the debtor's current finances, income and obligations. A complete list of creditors and detailed debts must also be given to the court. If a repayment plan was developed during the mandatory credit counseling, this document will need to be shared as well.

While Chapter 13 bankruptcy provides a variety of benefits, it can also be a complex undertaking. In addition to ensuring that that filing requirements are met, the debtor must also stay current with all covered obligations during the repayment period. A bankruptcy attorney can examine a client's particular set of circumstances in order to determine eligibility as well as to offer suggestions on other forms of debt relief that may be available.

Source: United States Courts, "Individual Debt Adjustment", September 20, 2014

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