When a person has no other option to get out of sky-high debts, he decides to file for bankruptcy. There are mainly two types of consumer bankruptcy - Chapter 7 and Chapter 13. In Chapter 13 bankruptcy, a person can keep his property, but has to pay back all or a portion of the debts over a period of three to five years. This is unlike Chapter 7 bankruptcy, where most of the debts are cancelled. In Chapter 13, a person has to surrender some of his property to the bankruptcy trustee for paying the creditors. As the person ends up paying most of his debts over time in Chapter 13 bankruptcy, it is also known as reorganization bankruptcy.
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Chapter 13 bankruptcy isn't for all. As this type of insolvency requires a person to use his income in repaying some or all of his debts, he will have to prove that he has the affordability for meeting the payment obligations. If the income of the debtor is irregular or too low, the court might not allow him to file for Chapter 13. According to the laws of the state, a Chapter 13 lawyer, (Louisville, KY), explains that if the total debt burden is too high, a person is not eligible for Chapter 13 insolvency. His secured debts (one that gives a creditor the right to take a specific item of property like house or car in case of non-repayment of the debt) cannot exceed $1,010,650, and the unsecured debts (like medical or credit bills which don't give any right to the creditors) cannot be more than $336,900.
Before a person can file for bankruptcy, he needs to go for credit counseling from an agency approved by the United States Trustee's office. These agencies can charge a fee for their services. However, if a person cannot afford to pay then they are required to provide counseling at reduced rate or for free. In addition, the debtor needs to pay the filing fee, which is currently $274, and file numerous forms. For line-by-line instructions on filling out the required bankruptcy forms, he should take help of Chapter 13 lawyer, (Louisville, KY).
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