In two recent blog posts, we discussed reasons why an individual may choose to file for bankruptcy and the benefits of Chapter 7 bankruptcy. In this post, we’ll take a closer look at Chapter 13 bankruptcy and provide general information related to qualification requirements as well as the overall process and benefits afforded to those who choose this form of debt relief.
Chapter 13 differs from Chapter 7 bankruptcy CHAPTER 7 BANKRUPTCY in that unsecured debts are not immediately discharged, but rather negotiated, consolidated and discharged upon the completion of a repayment plan. In order to qualify to file for Chapter 13 an individual or couple must show proof of sufficient and regular income. Additionally, there are restrictions related to the amount of unsecured and secured debt an individual is allowed to carry. Provided these criteria are met, a bankruptcy attorney will file with the court a Chapter 13 petition along with detailed debt and income information at which time a case trustee is appointed. A notice of the Chapter 13 filing is then provided to creditors, which prohibits the continuation of any debt collection practices.
Finally free from the harassing phone calls and threatening letters, an individual can focus and partner with their attorney to come up with a plan for how to repay outstanding debts which is then presented to creditors. Once details of the repayment plan have been sorted out, it must be approved by the bankruptcy court at which time a schedule of payments is established.
An individual is now well on his or her way to becoming debt free in three to five years. There are several benefits to filing for Chapter 13, the most important being debt reduction and consolidation. Additionally, an individual is given more control over the terms of debt repayment and is usually able to keep a home and car.
The rules and terms related to Chapter 13 can be complex and those who plan to seek debt relief through this form of bankruptcy are encouraged to seek the advice and help of a bankruptcy attorney who will guide a person through the entire process and ensure for a successful discharge as dictated by the terms of the repayment plan.
Source: U.S. Courts, “Chapter 13: Individual Debt Adjustment” 2014