Understanding The Laws Of Chapter 13 Bankruptcy
By: Jay Anderson
Chapter 13 bankruptcy is frequently also known as reorganization bankruptcy and also as a wage earner's plan. This allows individual consumers to work out a repayment plan for their debt which is supervised by the bankruptcy court. With this type of bankruptcy, consumers are given a period of time, usually three to five years, to repay all of the debt they have incurred. One of the bright spots of this particular chapter of bankruptcy is that creditors are not allowed to call you, harass you, or start any type of collections proceedings.
This type of bankruptcy may be better suited for some people, although each case is different. For example, with Chapter 7 bankruptcy, the consumer's debt is almost completely eliminated. While this sounds like good news, the caveat is that your assets will be sold in order to repay the debt. By contrast with Chapter 13, while your debt remains, it is reorganized so that you can comfortably make payments and you are allowed to retain your assets.
Some people view Chapter 13 bankruptcy as a debt consolidation loan. In many instances, an individual's debt is restructured and a repayment plan is formed. A trustee then distributes the money to all of the creditors. Under chapter 13 protection, individuals will not have any type of contact with the creditors. Certain debts are given a priority and must be repaid in full. They are put at the top of the repayment plan so they are paid first.
If you have a lot of assets like a house that you do not want to go through foreclosure on, this type of bankruptcy can protect that. If foreclosure proceeding are already in place, the bankruptcy will stop those from progressing further. You may have delinquent mortgage payments which need to be brought up to date, but they may lose their delinquent status. You must also keep up with future mortgage payments.
The basis for this type of reorganization is that your debt is restructured and rescheduled to make it easier for you to comfortably make your payments. This is done through a variety of methods, including lowering the interest rate or extending the term of the loan to result in lower payments. The goal here is to allow you to make the payments, but with lower payments so that you can make them on time.
Any individual, even if they are operating a business that is unincorporated or are self employed can file for chapter 13 bankruptcy as long as the overall unsecured debt is less than $307,675 and secured debt is less than $922,975. The baseline amounts are adjusted according to the consumer price index.
Before you are eligible to file bankruptcy, you must first go through credit counseling. The credit counseling must be through an agency that is approved by the United States Trustee's office. Although the companies may charge a fee for their services, if you are unable to pay their fee, they must reduce the cost and make adjustments for your individual situation.
If you need some financial breathing room that does not require liquidation of your assets, Chapter 13 bankruptcy may be what you are looking for. A workable repayment plan is arranged so that you can repay your debts. Although bankruptcy is not something you want to do, it might be the answer if you find yourself with an overwhelming loan of debt that you cannot see over the top of.
Article Source: http://www.ezarticles.info
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