Chapter 13 bankruptcy is for people who are able to pay off some of their debt. This is done through a payment plan which lasts between three to five years. Those who are not eligible to file for Chapter 7 protection may file for a Chapter 13 bankruptcy.
What is chapter 13?
People who are having problems paying their car and/or home loans can file for Chapter 13. This is also suited for people who have a tax liability or are carrying a student loan. These debts can be added to the repayment plan and the Debtor can make payments on the loans through the bankruptcy plan. Chapter 13 is also filled by people who want to keep their non-exempt assets. In order to qualify for Chapter 13, one has to have a regular income and unsecured debts may not exceed $250,000, while secured loans must not exceed $750,000. A person can use his or her pension, alimony, rents, royalties, wages, and profits from business or dividends to repay the loan under Chapter 13.
What are the benefits of filing Chapter 13?
As soon as someone files bankruptcy under Chapter 13, the court issues an automatic stay order, which prevents any creditors from approaching or collecting their due without prior permission from the bankruptcy court. So the first benefit is that you get immediate relief from the harassment from creditors and if the debtor follows the repayment plan, he or she will never have to deal with harassing creditors again. Additionally, the debtor will be able to keep both exempt and non-exempt properties. The most beneficial aspect of Chapter 13 is that the tenure for clearing one’s debts is substantially increased.
In order to file for Chapter 13, it is essential to consult a bankruptcy attorney before filing. The attorney will be able to review one’s financial situation and determine if filing for a Chapter 13 bankruptcy is the most prudent course of action. The attorney will also be able to construct a repayment plan that minimizes the amount of debt that must be paid back, which can save debtors a considerable amount of money.