Wage Earner's Plan
What Is a Wage Earner's Plan?
A wage earner's plan, referred to all the more formally as Chapter 13 bankruptcy, enables individuals with a standard income to restructure their obligations to repay their debt over the long run.
In a wage earner's plan, the debtor doesn't look to earn general [forgiveness](/dropping of-debt) of their outstanding debts. Rather, the debtor offers up a repayment plan that uses fixed installment payments, really solidifying debts into one month to month amount. The debtor makes payments to a selected unbiased trustee who then forwards them to the creditor for a predetermined period, generally three to five years.
Understanding Wage Earner's Plans
Chapter 13 bankruptcy was formerly called a wage earner's plan since relief under it was simply available to individuals who earned a standard wage. Subsequent statute changes expanded it to incorporate any individual, including the self-employed and those operating a unincorporated business.
Any individual is eligible for Chapter 13 bankruptcy as long as their unsecured debts are under $394,725, and secured debts are under $1,184,200, and they have received credit counseling from an approved credit counseling agency either in an individual or group preparation in somewhere around 180 days of filing. A corporation or partnership isn't eligible for Chapter 13 bankruptcy.
Chapter 13 Bankruptcy versus Chapter 7 Bankruptcy
individual who is earnestly in debt might file for either Chapter 13 bankruptcy or Chapter 7 bankruptcy. Chapter 13 bankruptcy considers the reorganization of debt, while Chapter 7 bankruptcy includes outright liquidation. With a Chapter 13 bankruptcy, debtors are permitted to keep their property. At the point when a debtor files for a Chapter 7 bankruptcy, they might have the option to keep home equity or a vehicle, yet equity shares, second homes, as well as vacation properties will be relinquish to pay back creditors.
One of the greatest benefits of Chapter 13 is that it offers individuals an opportunity to save their homes from foreclosure. By filing for Chapter 13 bankruptcy, individuals can halt any foreclosure procedures and present a plan to pay off any delinquent mortgage payments over a period of three to five years. Chapter 7 is the most common form of bankruptcy since it permits individuals to delete their existing debt and begin once again. Notwithstanding, periodically with a Chapter 7 bankruptcy, the individual filing gives up their home simultaneously.
A Chapter 13 bankruptcy likewise permits individuals to reschedule secured debts — barring a mortgage on their primary home — and expand them over the life of the plan, which might bring down their payments. What's more, a Chapter 13 bankruptcy has a special provision that might safeguard co-underwriters. Under this provision, plan payments are made to a selected fair trustee who disperses them to creditors, so the debtor has no direct contact with creditors.
Step by step instructions to File for a Wage Earner's Plan
To file for Chapter 13 bankruptcy, the debtor must initially cause a rundown of every creditor they to owe money to, along with the amount of money owed. They must likewise incorporate a rundown of any property owned. Those filing for Chapter 13 bankruptcy must likewise submit information about their income — the amount they make and where their income comes from — notwithstanding definite information about their monthly expenses. Debtors must likewise have completed credit counseling before becoming eligible.
Illustration of a Wage Earner's Plan
Eric and Sam are a married couple. Eric lost his job in a round of cutbacks and his better half Sam was harmed at his job, leaving him unable to work in the same year. They fell behind on their mortgage payments and in the end ended up owing $75,000 to their bank. Not long after the bank initiated foreclosure procedures, Eric received a job offer and Sam sent off a small business from their home. By filing for a Chapter 13 bankruptcy, they had the option to stop the foreclosure procedures and keep their home.
Because of their now-consistent income stream, Eric and Sam can pay their mortgage every month going ahead. The back payments they owe on their mortgage are due north of a five-year period, with manageable payments spread out throughout that time.
Features
- A wage earner's plan, likewise called Chapter 13 bankruptcy, lets individuals with stable job income to repay debts and obligations associated with a personal bankruptcy.
- While Chapter 7 bankruptcy is the most common form of bankruptcy, one of the greatest benefits of a Chapter 13 bankruptcy versus Chapter 7 is that it offers individuals an opportunity to save their homes from foreclosure.
- By filing for Chapter 13 bankruptcy, individuals can halt any foreclosure procedures and present a plan to pay off any delinquent debts — including mortgage payments — over a period of three to five years, really merging each of their debts into one month to month amount.
