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Understanding-chapter-13-bankruptcy
By Lesley Lyon
Chapter 13 filing is for individuals in the United States to undergo a financial reorganization, which is supervised by a Federal Court. The individual who is badly in debt can file for either under Chapter 7 or Chapter 13 or Chapter 11. The debtor chooses under which Chapter he or she is going to file for bankruptcy. The debtor’s financial characteristics and the type of relief sought play a great role in the choice of chapters.
The US Code sets forth debt limits for individuals to be eligible to file under Chapter 13 -
Unsecured debts of less than $336,900 and secured debts of less than $1,010,650 subject to annual cost of living increase (secured debt gives a creditor the right to take a specific item of property like home or car. Unsecured debt is a credit card or a medical bill).
Under Chapter 13, the debtor plans to pay his creditors over a period of three to five year. During this period, his creditors cannot attempt to collect the individual’s previously incurred debt except through the court. The individual keeps his property and its creditors get less money than they are owed.
The most important criterion for an individual to be able to file for chapter 13 is that the person must have a regular income. The bankruptcy-filing petition must be accompanied by the proposed payment plan to provide the payment of all priority claims. Priority claims are those claims that are given a special status under law such as taxes and the cost of proceedings. If the person is unable to complete the priority plan due to serious illness or loss of job, it can ‘justly be held accountable’. If the debtor fails to keep up payments as per the plan, the court may terminate chapter 13 to dismiss the proceedings entirely resulting in collection efforts resuming as before.
A chapter 13 plan is a document filed with or shortly after a debtor’s chapter 13-bankruptcy petition. The plan gives a detailed report of the treatment of debts, liens and secured status of assets and liabilities owned or owed by the debtor in connection with his petition. It has to meet certain requirements like unsecured creditors will receive as much through the chapter 13 plan as they would in chapter 7 liquidation, repay all creditors in full or commit all of the debtor’s disposable income to the chapter 13 plan for at least three years.
Working of Chapter 13 bankruptcy: to keep all of their property, the court approves a new interest free plan for repayment. A written plan is formed to give details of all the transactions that might occur and also the duration. Repayment must begin within 30 to 45 days after the starting of the case. The creditors must strictly adhere to the repayment plan approved by the court and are banned to collect any claims from the debtors. The debtor's Attorney will prepare the repayment plan.
Advantages of Chapter 13: The advantages of chapter 13 over chapter
7 are: the individual can stop foreclosure and have a mortgage upon plan completion, achieve a super discharge of debt kinds not dischargeable under chapter 7 and value collateral to diverge the security interest of creditors where creditors either charge too much interest or are over secured or both and to prevent collection activities against non filing co-signers. Another advantage of Chapter 13 is that repayment can be created even if creditors disagree with it as long as the court approves it.
Disadvantages of Chapter 13: The main drawback of filing personal is that a record of this stays on the individual’s credit report for ten years. During this period, the debtor is not allowed to obtain additional credit, without the court’s permission.
Since chapter 13 bankruptcies require to use the person’s income to repay some of the debts it is necessary to prove to the court that he or she can afford to meet the payment obligation – if the income is irregular or too low, the court might not allow to file the chapter 13. Before filing for it is necessary to receive credit counseling from an agency approved by the United States Trustees’ Office. Article Source: http://www.upublish.info About the Author:
Lesley Lyon
http://www.assistfinancial.info extensively deals with to help laymen understand the legal process better. http://www.monetaryguru.com helps find better solutions to avoid foreclosures. Keywords: bankruptcy, bankruptcy laws, bankruptcy attorney, chapter 7 bankruptcy, chapter 13 bankruptcy, filing bankruptcy, chapter 11 bankruptcy, **NOTE** - Lesley Lyon has claimed original rights on the article "Understanding Chapter 13 Bankruptcy" ... if there is a dispute on the originality of this article ... please contact us via our Contact Form and supply our staff with the appropriate details of dispute.
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