What Is A Chapter 13 Bankruptcy?
Many consumers that are bogged down in debt frequently turn to bankruptcy as a form of restoring their financial status back to a zero balance. Unfortunately many of these same consumers are confused when it comes to the difference between a Chapter 13 bankruptcy and a Chapter 7 bankruptcy. This quick article will explain what a Chapter 13 bankruptcy actually is and what it does for a consumer that files this form of debt relief. Before explaining what a Chapter 13 is I want to make sure that you are familiar with what the definition of bankruptcy actually means. It is basically a legal process that is filed in a court of law. The reason for filing this debt elimination strategy is to relieve individuals or businesses that cannot pay their current financial obligations of those same debts. This allows them a fresh start on their finances. A Chapter 13 bankruptcy which normally runs around $185 to file is commonly referred to as reorganization bankruptcy. This form of debt elimination i
Chapter 13 is a proceeding under which a debtor proposes to his or her creditors and the court, a plan that enables the debtor to repay as much debt as is feasible given the debtor’s financial circumstances. To be confirmed by the court, a plan must provide that the debtor’s future income be subject to court administration. After determining a reasonable budget, the debtor’s remaining income is paid (generally monthly) by the debtor’s employer to the trustee who, after taking a commission, pays the creditors according to the plan provisions. A plan generally lasts three years, but may last up to five years if the court approves the longer period, or if a debtor is required to propose a five-year plan due to their income level. At the end of the plan, the debtor is entitled to receive a discharge of any remaining debt.Back to Top Who may file Chapter 13 bankruptcy? Chapter 13 is limited to individuals and unincorporated businesses that have a regular source of income, and whose secured
In Chapter 13, some debts may be repaid in an affordable manner. Chapter 13 allows you to modify some loan agreements and even eliminate significant portions of unsecured debt. Chapter 13 allows for the repayment of only what an individual or family can reasonably afford. If your home is in foreclosure a Chapter 13 will stop the foreclosure immediately. You will be provided the opportunity to get caught up on your mortgage payments over a three to five-year period, with reasonable monthly payments. Chapter 13 protects your car from repossession and may also reduce the amount you owe. Even if your car has already been repossessed, your car lender may be ordered to return the car to you if you act quickly. Chapter 13 also stops garnishments, tax levies, and lawsuits. Back income taxes can be paid through Chapter 13 without further interest or penalty and in many cases less than the full amount of the taxes must be repaid. Some back property taxes can also be put into your payment plan.
Chapter 13 bankruptcy results in a plan to repay all or part of your debt, but it is not designed to discharge or eliminate most debts. Chapter 13 is used most often to save a house from a foreclosure sale. Chapter 13 is also useful to eliminate some IRS debt and to establish an affordable plan to pay IRS debt that cannot be eliminated. Chapter 13 bankruptcy is available to debtors with regular income. If you do not have regular income, you cannot fund a Chapter 13 plan. A business cannot file Chapter 13. In addition, there are upper limits on the amount of the individual’s secured and unsecured debts in Chapter 13 cases.
Chapter 13 bankruptcy resolts in a plan to repay all or part of your debt, but it is not designed to discharge or eliminate most debts. Chapter 13 is used most often to save a house from a foreclosure sale. Chapter 13 is also usefol to eliminate some IRS debt and to establish an affordable plan to pay IRS debt that cannot be eliminated. Chapter 13 bankruptcy is available to debtors with regolar income. A business cannot file Chapter 13. In addition, there are upper limits on the amount of the individual’s secured and unsecured debts in Chapter 13 cases.
