What you need to know about chapter 13 Bankruptcies



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What you need to know about chapter 13 Bankruptcies

July 22nd, 2007 by Shenron

Chapter 13 Wage Earner Bankruptcy lets you repay your debts without the need to turn over any property as is usually the case with Chapter 7 Bankruptcy. Under this chapter, you are allowed to use any income you may obtain in the future in order to pay off your creditors. The court approves a payment plan which may last from three to five years, depending on your income.

Eligibility

Since Chapter 13 requires you to pay off your creditors using your income, the most important criteria for filing bankruptcy under this chapter is to have a stable income and an adequate disposable income. If you don’t have a regular income or if it’s too low, you may not be allowed to file for Chapter 13. Likewise, if your debts are too large, you are ineligible. Your secured and unsecured debts must not exceed certain amounts which are adjusted regularly based on the consumer price index.

How Does It Work?

You will be allowed to keep all of your property but upon declaring bankruptcy you have to include a plan to pay your creditors over three to five years. Such plan is distributed to creditors who have the right to make objections if they think it is unjust. When the court approves the plan, you will have to commence monthly payment to your creditors. A bankruptcy trustee appointed by the court to collect your payment and distributes these to your creditors, may or may not be involved in a Chapter 13 bankruptcy although it is a must for Chapter 7. Either way, creditors are prohibited to collect any claim from you if it is not according to the plan. If you are able to complete the plan as is ordered by the court, you will be discharged from all your debts. If not, the plan may be modified depending on your reasons for non – completion. If your reasons are unjustifiable, your creditors may request the court to have the Chapter 13 proceeding terminated. If this is approved, your assets may be collected as before you filed for bankruptcy.

Advantages

Those who apply for Chapter 13 bankruptcy gets to keep all of their properties. If you think that you have a lot of property to lose but you have enough monthly income to pay off your debts, then Chapter 13 is a better option than Chapter 7. Furthermore, as long as you follow the payment plan ordered by the court, you will be given a full plan discharge. Another advantage of filing under this chapter is that the payment plan may be approved and enforced by the court even if your creditors object to it. But of course, the court also allows them to file any objections, if they have any.

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