Chapter 13 offers individuals numerous advantages over liquidation under Chapter 7. This chapter of bankruptcy proceeds individuals (and their spouses) with regular income who have unsecured debts. Debts approximately less than $400,000 and secured debts approximately less than $1,200,000. This chapter of bankruptcy is a reorganization proceeding. Where the debtor will attempt to repay some debt and retain non-exempt assets. Many debtors use this chapter to repay debts they have fallen behind on like mortgage payments or certain types of tax debt. In a reorganization case, the debtor will normally have anywhere from three to five years to repay a portion of his or her debt. Repayment in this chapter can range from 10% to 100%. Depending on what type of debt the individual has and the amount of his or her income can influence the range.
Reasons For Filing Under Chapter 13
Reasons for filing under this chapter of bankruptcy include protecting homes from foreclosure or cars from repossession. A sincere desire to repay debt or a potentially less onerous effect on the ability to obtain new credit. Chapter 13 debtor’s reorganization is achieved by the proposal of a repayment plan to the bankruptcy court. Which if successfully performed entitles the Chapter 13 debtor to retain non-exempt assets. Allowing them to receive a discharge of any remaining debt after completion of the repayment plan.
Chapter Thirteen is an adjustment bankruptcy in which the amount you owe is reduced according to your income, expenses, and ability to pay. It allows you to create a 3 to 5 year repayment plan based on future earnings to pay off all or part of your debts.
It may also allow you to renegotiate the debt and interest rate on your vehicles and other personal property. For unsecured debt, Chapter 13 can stop interest from accruing and allow you to pay off part of the debt, while discharging the rest.
Most importantly, like Chapter 7, the first thing Chapter 13 Bankruptcy will do is stop the collection efforts. Creditors are prohibited from contacting you in any way to collect a debt after you have filed. Giving you space to take a breath and get caught up!
Chapter 13 Resources
Learn more about Chapter 13 Bankruptcy Law by visiting www.uscourts.gov.