Chapter 13 Bankruptcy

What is Chapter 13 Bankruptcy?

Chapter 13 is a form of bankruptcy that enables individuals in the United States to pay off their debts when all other avenues of repayment have been exhausted. Enacted by Congress pursuant to Title 11, Chapter 13 bankruptcy seeks to provide individuals with a fresh start financially while also allowing creditors to maximize the amount of money they receive. Chapter 13 is a voluntary bankruptcy filing, and allows individuals with disposable income to a way to pay off their debts.

Under a Chapter 13 filing, an individual undergoes a court-supervised reorganization of his/her finances. This chapter of the bankruptcy code differs from Chapter 7 which offers complete relief of many debts immediately upon filing. Under a Chapter 13 filing, the debtor must still pay off his/her debts, though now the repayment is under the supervision of a federal bankruptcy court.

Debtors who file under Chapter 13 usually have the disposable income necessary to enact a viable repayment plan. They also have unsecured debts of less than $336,900 and secured debts of less that $1,010,650. Payments of debts are usually enacted through payroll deductions.

Under Chapter 13, a written plan meant to last 3-5 years is agreed upon by both the debtor and his/her creditors. Repayment generally begins within 30-45 days of the plan's approval. Payment is generally made to a trustee who then distributes the funds to the various creditors involved with the case. Most debtors who file for bankruptcy also keep an attorney to assist with the many legal ramifications a bankruptcy filing that can occur. With this type of bankruptcy, the individual gets to keep his property and the creditors will receive less money than they were originally owed.
Filing for Chapter 13, or for bankruptcyof any kind, has its advantages and disadvantages. One disadvantage is that a Chapter 13 filing stays on an individual's credit report for 7 years. Though this is less than the 10 years of a Chapter 7, it is still a long period during which almost all credit is denied to the individual. Some advantages of Chapter 13 are the ability to stop foreclosures during the bankruptcy period and the ability to achieve a super discharge of kinds of debts not dischargeable under Chapter 7. Filing Chapter 13 bankruptcy also prevents collection activities against non-filing co-signers during the life of the case.

Chapter 13 bankruptcy is something that you do not want to jump into because it will change the way that creditors view you in the future. You will be considered a high risk investment and may not qualify for much. Most attorneys will offer free consultation for those who are considering filing bankruptcy. During this time you can ask any questions that you may be confusing and they can also guide you to your final decision to file or not to file. It's best to see an attorney that handles bankruptcy cases regularly so they can give you the best advice on which direction is right for you. In the end the decision will be yours to make but it helps to have professional guidance.

By Smith Gerrid

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