Chapter 13 Bankruptcy
When you file Chapter 13 bankruptcy, you try to pay off as many debts as you can. You are not required to lose your assets but you have to make payments from your income. The Fed has designed the bankruptcy laws in such a manner that the lending business is made more streamline. The Congress also aims at helping consumers who plan to file bankruptcy under various circumstances and helping the American citizens for debt relief. Chapter 13 is meant mainly for people who have regular income and are in a position to pay back some or all the debts with the help of a new repayment plan. Here lies the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy. While in Chapter 7 bankruptcy, you need to surrender your non exempt assets so that they can be sold and paid for your debts. Chapter 13 bankruptcy doesn’t require you to surrender your assets. You retain your assets. Instead you are given a repayment plan and according to the new payment plan you are expected to make the payments.
Who qualifies for Chapter 13 bankruptcy?
If you are having regular income you can file for Chapter 13 bankruptcy. Business entities or corporate houses are not allowed to file. If you intend to file Chapter 13 bankruptcy, you have to give sufficient proof that you are in a position to pay back the debts provided you are given a new repayment plan. If it is found that your income is low, you don’t qualify for the same.
You also have to take a credit counseling session for this. There are many credit counseling agencies offering their services by charging nominal fees. If you can’t afford to pay for the credit counseling session, you can also ask for free credit counseling.
Repayment plan is the most important part of Chapter 13 bankruptcy. The repayment plan shows the order in which the payments will be made to the creditors. A “priority list” is worked out. The list contains details of debts that need to be attended first. Included in this category are payments for employee owed wages, tax obligations, child support and alimony. You pay off secured debts first followed by unsecured debts.
In case you are unable to follow the repayment plan due to unforeseen events, the court allows your repayment plan to be modified. Despite the modification if you are unable to pay back, Chapter 13 either gets converted to Chapter 7 bankruptcy or the court discharges your debts provided there is a concrete evidence to do so.
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