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What Is Chapter
13 Bankruptcy
When someone
files for bankruptcy under
Chapter 13 of the Bankruptcy
Code, their aim is to have the
opportunity to repay some or all
the debts in their name, in
better terms, such as lower or no
interest. Unlike Chapter 7 which
involves liquidation of assets,
this process allows the debtor
to use whatever income they may
have in the future to pay off
the creditors. Needless to say,
filing
Chapter 13 Bankruptcy is
applicable for a debtor who does
have a regular income, and thus
can afford to request for such
adjustments, or reductions. Your
bankruptcy lawyer will explain
the difference to you.
The United
States Bankruptcy Code gives the
debtor a ceiling of 5 years,
within which time the creditors must
be paid back. While the attorney
will safeguard your interests,
the entire process is carried
out under the supervision of the
courts.
How Does Chapter
13 Bankruptcy Work?
While debtors
are allowed to keep all of their
property, the court approves a
new interest-free plan for
repayment. A written plan is
created giving details of all
the transactions that will
occur, and the duration of the
same. The repayment must begin
within thirty to forty-five days
after the case has started. The
transitory stage of paying a
trustee who then pays a
creditor, as in Chapter 7
Bankruptcy is usually eliminated
with Chapter 13 Bankruptcy.
Although, in some cases people
may involve a trustee who would
take care of disbursing money to
the creditors as per the plan.
Also, as per the law the
creditors must strictly adhere
the repayment plan approved by
the court and are in fact
prohibited to collect any claims
from the debtor. Your bankruptcy attorney
will prepare new repayment plan
to best suit your situation.
The one
advantage of Chapter 13 over
Chapter 7 Bankruptcy is the full
discharge option which is not
applicable under Chapter 7
filing. For example, if a debtor
manages to complete all
necessary payments in the plan,
he/she is given a full plan
discharge. (There are a few
exceptions to this case, which
your bankruptcy attorney will guide you
about if necessary.) Yet another
advantage of the Chapter 13
filing is that a repayment can
be created even if creditors
disagree with it, as long as it
is approved by the Court.
Although, in all fairness the
court allows creditors also to
file an objection, in case they
may have any.
Who Can File For
Chapter 13 Bankruptcy?
The most
important criteria for a person
to be able to file for Chapter
13 bankruptcy is that the
individual must have a regular
income. There are a few other
criterions that must be met for
filing a Chapter 13 Bankruptcy,
your bankruptcy attorney will be the best
person to introduce you to
these!
How Can I File
For Chapter 13 Bankruptcy?
Let ’s just say
our attorneys will ensure that
you don’t need to bog yourself
down by trying to understand the
complicated details of this
answer. Essentially, the filing
for Chapter 13 Bankruptcy
entails the following.
Determine whether
Chapter 13 is the best
solution for you.
Prepare
a budget.
Examine
individual cases to
figure out whether
require filing of
Chapter 13 bankruptcy,
or can be tackled in
some other way.
Determine and implement
methods of dealing with
secured creditors.
Devise a
chapter 13 plan, and
fill out the forms.
Pay the
filing fee and complete
the process of filing
the forms and pleadings.
Attend
whatever meetings you
maybe required to
attend; with the
creditors, court
hearings etc.
Obtain a
discharge once the
payments have all been
made, and the plan
terminated.
In a
Chapter 13 bankruptcy,
the debtor makes
payments to a bankruptcy
trustee and the
bankruptcy trustee in
turn distributes a
percentage of the
payment to the
creditors. A Chapter 13
plan is filed with the
court which determines
the amount distributed
to each creditor by the
trustee. A bankruptcy
judge can force the IRS
to accept extended
payments on personal
income tax liability
through a Chapter 13
plan.
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