Understanding The Laws Of Chapter 13 Bankruptcy
Chapter 13 bankruptcy, which is sometimes referred to as a wage earners plan or a reorganizational bankruptcy, grants individuals to set up a repayment plan to pay off their debts. With chapter 13 bankruptcy, individuals make payment arrangements so that they have the ability to repay a portion or all of their debt over a three to five year period of time. All of the debt included in the bankruptcy must be repaid within the five year period. During this given period of time, creditors are not allowed to start or continue any type of collection efforts.
Each case is different but this chapter is ideally suited for some people when they’re considering bankruptcy. By contrast with Chapter 7 bankruptcy, your debt is nearly completely wiped out, even though the bad news is that your assets may be sold or liquidated in order to pay off your debt. But with Chapter 13, you retain your assets and your debt isn’t eliminated but it is restructured so that you have the financial breathing room you need to comfortably and adequately make the payments.
Bankruptcy isn’t a debt consolidation loan, even though some people might view it in that way. With Chapter 13, your financial obligations remain and you are not given any type of loan to pay them off. A repayment plan is defined and the funds are distributed to your creditors by a trustee which is appointed by the court. You no longer have any type of contract with your creditors, but that fact does not negate the fact that you still have financial obligations with each creditor. Certain types of debts are prioritized and are paid first.
This type or chapter gives homeowners the opportunity to keep their home from being foreclosed on. Once chapter 13 bankruptcy proceedings start, a foreclosure procedure might be stopped and over time, delinquent mortgage payments may be cured. However, homeowners must still make all monthly mortgage payments during the time of the bankruptcy.
If you’ve a significant amount of secured debt, it can be restructured and rescheduled to make it easier for you to make payments. The interest rate may be lowered and/or the term may be extended which will result in lower monthly payments, thereby making it easier for the consumer to make the payments.
Any individual, even if they are operating a business that’s unincorporated or are self employed can file for chapter 13 bankruptcy as long as the overall unsecured debt is less than $307,675 and secured debt is less than $922,975. The baseline amounts are adjusted according to the consumer price index.
Before you’re eligible to file bankruptcy, you must first go through credit counseling. The credit counseling must be through an bureau that is approved by the United States Trustee’s office. Although the companies might charge a fee for their services, if you are unable to pay their fee, they must reduce the cost and make adjustments for your individual situation.
The bottom line is that Chapter 13 bankruptcy grants individuals some financial breathing room to repay their debts and does not require liquidation of their assets. A viable repayment plan is worked out so that debts can be repaid. This works for consumers who can still make payments but have found themselves with too much debt to handle at a particular time in their lives.
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