What Is Chapter 13 Bankruptcy?
A Chapter 13 Bankruptcy is simply a repayment plan. When someone files for a Chapter 13 Bankruptcy they have the opportunity to repay some or all of the debts in their name at a better rate of interest. While a Chapter 7 involves liquidating assets and wiping out debt, a Chapter 13 restructures debts to allow the debtor to use the income they have to pay off creditors. The Chapter 13 process requires that the debtor show that he/she has regular income with which to make plan payments. A bankruptcy attorney can discuss with you what qualifies as regular income.
The United States Bankruptcy Code in a Chapter 13 gives the debtor a maximum of 5 years to pay back creditors. While the attorney will defend any interests you may have, the entire Chapter 13 process is supervised by the Bankruptcy Court to make sure that the debtor repays the creditors as agreed in the Chapter 13 bankruptcy, generally however, the unsecured creditors are paid back at a much lower percentage while the bulk of your plan payment is dedicated to paying back the arrearages on your home or other secured debts.
What are the benefits of a Chapter 13 Bankruptcy?
The main point of a debtor filing a Chapter 13 is to save the debtor’s home from foreclosure. By putting their arrearages in a Chapter 13 payment plan, as long as the debtor makes their monthly trustee payments, they will be able to save their home. A lot of Chapter 13 bankruptcy filers are people who have been turned down for loan modifications and this becomes the last option they usually have in order to save their home. Due to new legislation passed last year, a Chapter 13 now allows most debtors the ability to file a motion to strip their second trust deed when it has become an unsecured debt due to the drop in the real estate market.
The beauty of the Chapter 13 Bankruptcy is that debtors are generally allowed to keep all or most of their property and the court will sometimes approve new or low interest rates for the repayment of the debts. These interest rates are usually far below what a debt management company can help you negotiate with creditors. Furthermore, a written plan is drafted which lists all the details of the repayment plan and the duration. The repayment must start within 30 to 45 days after the bankruptcy has started.
Who Can File For Chapter 13 Bankruptcy?
In order to file a Chapter 13 Bankruptcy a certain debt to income ratio must be met. Furthermore, the debtor must show that they have regular income in order to qualify. Your attorney will be able to advise you what qualifies as regular income.
Start the Chapter 13 Process
Before you file for a Chapter 13 Bankruptcy you should contact an attorney to review your situation to see if you qualify. Our office uses an online form that the potential client fills out. Once we receive all of your information the attorney will review it to see if you qualify.