Chapter 13 Bankruptcy Laws
The Chapter 13 bankruptcy laws (often called 'wage earners bankruptcy') have changed in the past few years so an evaluation will help you assess the key points to consider in deciding whether to file Chapter 13 bankruptcy, Chapter 7 bankruptcy, or not to file bankruptcy at all.
Chapter 13 is a 'repayment-plan bankruptcy', in which you agree to repay your debts - or at least a portion of them - according to terms that must be approved by the court. In addition, your assets are not sold to repay creditors as they would be in Chapter 7.
So, if your aim is to have the opportunity to repay some or all of your debts, with better terms, i.e. lower or no interest, and retain some or all of your assets, then filing Chapter 13 bankruptcy may be your best option.
Who can file a Chapter 13 bankruptcy?
An individual with a regular income who owes:
less than $250,000.00 in unsecured debt and
less than $750,000.00 in secured debt may be eligible to file.
Note: Your debts must also be for a certain, fixed amount and not subject to any conditions.
The chapter 13 bankruptcy law provides that during your 'evaluation' ordered by the courts, you... the debtor, along with a court approved credit counsellor, will develop a plan (based on your future income/earnings) to repay creditors. Your repayment plan can extend as long as three to five years (maximum), although some repayment plans can have a shorter term.
You, are allowed to keep all of your property if the court approves this new plan for repayment. The repayment plan must be in writing, giving details of all the transactions that will occur, and the duration of each. The repayment must begin within thirty to forty-five days after approval. You may involve a Trustee who would distribute your payments to the creditors as set out in the plan. This entire process is carried out under the supervision of the courts.
Once you have filed for bankruptcy, you will have no access to your old or previous lines of credit. You will also have limited, if any, access to new credit.
The bankruptcy goes on your credit report, and remains there for several years. It may surprise you to learn that the amount of time your bankruptcy remains on your credit report does not start to count down until your repayment plan is completed.
Chapter 13 Bankruptcy Laws: Legal Help
Debtors often have a lawyer prepare and file all the necessary bankruptcy documents, although some people represent themselves. A consultation with a lawyer or Certified Credit Counsellor/Trustee will help you:
Determine whether Chapter 13 bankruptcy is the best solution for you or whether your debt can be tackled some other way.
Prepare a budget.
Evaluate and determine methods of dealing with secured creditors.
Create a Chapter 13 Plan, and fill out the necessary forms.
Pay the filing fee and complete the process of filing the forms and court pleadings.
Organize whatever meetings you may be required to attend with the creditors, court hearings etc.
Obtain a discharge once the payments have all been made, and the plan has been terminated.
Chapter 13 Bankruptcy Explained: Secured Creditors
Secured creditors** are paid "outside" the Chapter 13 repayment plan. For example, fully secured first mortgages and possibly second or third mortgages may be "outside" the plan. Consult with your attorney and be very clear on who should be included in this secured creditor category.
Payments to secured creditors should be made regularly, directly to the creditor, just as they were supposed to have been made before filing bankruptcy. So, if your payments were due on the first of the month, make the payments for the first of the month. If you fail to make these payments, these creditors will have grounds to begin foreclosure proceedings on your property.
** Secured Debt:
This article about Chapter 13 bankruptcy laws is provided for your information and as general guidance. It is not intended as, nor should it be construed as, legal, financial or other professional advice. We recommend that you consult with your attorney or financial advisor about all your legal or financial issues.
For Bankruptcy issues, the Lexington Law Firm can be very helpful.
Likewise, Curadebt can assist you with debt settlement or debt consolidation to reduce or restructure your personal or business debt.
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