Declaring Bankruptcy- Is Chapter 13 the Answer to Your Problems?
by:
Albert Alexander
Chapter 13 is the chapter under the bankruptcy code which allows a person to repay all or a portion of his or her debt under the protection of the bankruptcy court. Chapter 13 is designed for individuals with regular income who desire to pay their debts but are currently unable to do so.
Unlike Chapter 7 which is a complete discharge of the debt, Chapter 13 is a reorganization of the debt owed to creditors. With this reorganization, a payment schedule set up whereby the wage earner makes timely payments to the creditors over a three to five year payment period.
Chapter 13 is often used by individuals who want to catch up past due mortgage or car loan payments and keep their assets. Chapter 13 is usually chosen by those who wish to repay all or part of his or her unsecured debts and has at least some income to do so. This type of bankruptcy is an option used by those who have valuable nonexempt property, like a house or car, which might be lost in a Chapter 7 case.
Chapter 13 is a good option for some debtors who are facing foreclosure or repossession of their assets because of late payments, but wish to keep these items and can now afford to make the regular payments. Some are not eligible for a discharge under Chapter 7 because the debtor has too much income and/or too much property. There are also those who file Chapter 13 bankruptcy because they're simply not eligible for Chapter 7 protection because they have filed for and received a Chapter 7 discharge within the past 8 years.
Debtors who have a regular source of income repay some or all of their debts over a three-to-five year period during which they are free from harassment from their creditors. Debtors in chapter 13 keep all of their property, whether or not it is exempt, but they make regular payments on their debts out of the money that they earn after filing the bankruptcy case.
Chapter13 is a part of the United States Bankruptcy Code that allows individuals to reorganize their debts under the protection of a federal court. Chapter 13 bankruptcy will let you keep those assets which would be liquidated under Chapter 7, such as vehicles or a home. Bankruptcy is a federal court process that places you under the protection of the bankruptcy court while you try to repay your debts.
Creditors may receive all or a portion of their claims, depending primarily on the payments you can afford to make. Creditors are usually paid out of the debtor's income and not from the debtor's property. Creditors are not permitted to file lawsuits or attachments against you during the chapter 13 case, and, if the debtor is granted a chapter 13 discharge, they will be prohibited from attempting to collect any discharged debt from you after the case is closed. Creditors must also refrain from any collection activities for the duration of the plan.
Similar to Chapter 7 bankruptcy, certain debts are not discharged in Chapter 13 as well. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime. Debts that are proven to be the result of fraud or breach of a fiduciary duty by the debtor may no longer be discharged in a Chapter 13.
Chapter 13 is an ideal option for anyone who is lagging behind on mortgage and car payments and needs help from someone to keep from losing their home and/or vehicle. Chapter 13 is a repayment plan that helps you to reorganize your bills based on your income. Chapter 13 is often called "the wage earner's plan" because a debtor filing chapter 13 bankruptcy must have income, usually from employment, to contribute to a court approved chapter 13 debt repayment plan. Whether you call it a repayment plan, a reorganization plan or a wage earner's plan, Chapter 13 is a form of bankruptcy and will appear as such on your credit report if you pay all your creditors in full.
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