Chapter 13 bankruptcy is a repayment plan, sometimes called a "wage earners'" plan. It allows people that have a regular income to repay all or part of their debts. With a chapter 13, a repayment plan is proposed that will make payments to the creditors over a three to five year period. The court will approve the plan, or revise it based on the debtor's situation and eligibility. A chapter 13 also has its own advantages compared to a chapter 7.
The Advantages
There are several advantages that a chapter 13 offers over a chapter 7. One of the most significant advantages is that a chapter 13 allows people the opportunity to save their homes from foreclosure. A chapter 13 can stop the foreclosure process and may resolve past due mortgage payments. A chapter 13 also allows the individual the ability to pay other secured debts they may have incurred over the span of the bankruptcy (3-5 years). This may also lower the monthly payments of those debts. This chapter may also protect co-signers of those debts. The final advantage of a chapter 13 is that it acts as a consolidation loan. This means that the debtor will make payments to a trustee overseeing the bankruptcy and distribute those payments to the individual creditors. As a result the debtor will have no contact with the creditors which may prevent many financial headaches in the long run.
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Eligibility Requirements
A chapter 13 is, however, not for everyone. There are several eligibility requirements that the debtors will have to meet. The first is that the unsecured debts must be less than $336,900 and the secured debts must be less than $1,010,650 (11 U.S.C. § 109(e)). These amounts are changed periodically due to changes in the consumer price index and inflation. A person is not eligible for a chapter 13 if, in the past 180 days, a prior bankruptcy petition was dismissed due to failure to appear in court, comply with orders, or was dismissed voluntarily after the creditors sought relief from the courts to recover property which the held liens upon (11 U.S.C. §§ 109(g), 362(d) and (e)). The debtor must have also, in the past 180 days, attended credit counseling from an approved credit counseling agency to file any kind of bankruptcy (11 U.S.C. §§ 109, 111). Any debt management plan made during credit counseling must be filed with the court.
To learn more about chapter 13 bankruptcy and how to file one visit Randolph Goldberg or US Bankruptcy Court.
A chapter 13 is defiantly a long process, but unlike a chapter 7, you get to keep all of your personal property. Although you should always sit down with an attorney and look at all of your options before filing any kind of bankruptcy to see if there is any other way to resolve your debt problems.
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