If you're considering filing for bankruptcy, then you may have heard the terminology "wage earner's plan" thrown about. This phrase is just another name for a Chapter 13 bankruptcy. It's a simple way of describing what's involved in filing for this type of debt relief.
The reason that Chapter 13 bankruptcy is referred to as the "wage earner's plan" is because debtors who file for this type of debt relief often do so after failing a Chapter 7 mean's test. If after tallying a person's assets, income and expenses, if what's left over exceeds state limits, then an individual becomes ineligible to file for Chapter 7 bankruptcy. Those with income above this are required to file Chapter 13 bankruptcy instead.
As part of this process, debtors are given an opportunity to craft a repayment plan to pay back their debts over a three- to five-year period as they're deemed to have the means to do this. If their income fell below that state income threshold, then they'd have to file Chapter 7 bankruptcy. This would force them to liquidate their belongings and use the proceeds from their sale to repay their creditors instead.
Individuals or sole proprietors with less than $1,184,200 in secured debts and $394,725 in unsecured ones may be eligible to file for Chapter 13 bankruptcy. They're required to have completed credit counseling and to have not previously filed for debt relief under the U.S. bankruptcy code in the preceding 180 days.
One of the great benefits of filing for Chapter 13 bankruptcy over other types is that it can allow you to save your home from being foreclosed. If you've fallen behind on your mortgage payments, then filing for Chapter 13 bankruptcy may give you the time you need to bring your account current. It's likely that your repayment plan will include reduced mortgage payments to ensure that you'll be able to pay on time each month.
While there are many benefits that you can derive from filing for Chapter 13 bankruptcy, such as saving your home, you must make timely payments in order to be allowed to remain on the repayment plan. To learn more about the requirements needed to file for this type of debt relief and how you may benefit from doing so, you should consult a Long Island Chapter 13 bankruptcy attorney.