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Bankruptcy Chapter 13
The thought of the term Bankruptcy itself can send chill down the spine to anyone. It is really a difficult situation to be in when you are bankrupt. One should be aware of all minute details before he or she seeks protection under bankruptcy chapter laws. One such law is called bankruptcy chapter 13. Only individuals with regular income can seek protection under bankruptcy chapter 13 law. Under bankruptcy chapter 13 the individual can plan, such that he can pay back his entire debt or at least a part of the debt which he owes to the creditor.
The debtor has to propose a plan according to which he can repay the creditor in several installments ranging over a period of 3-5 years. In case his monthly salary is considerably less he can be given a period of 5 years to repay his debts. In this period of time the creditors are forbidden by the law under Bankruptcy Chapter 13 to start the collection process from the debtor.
Before we move into the technicalities of Bankruptcy Chapter 13 lets understand the eligibility criteria first. Both self employed as well as persons working in an organization can seek relief under Bankruptcy Chapter 13 as long as their unsecured debts are below $336,900 and secured debts are under $1,010,650 mark. And remember that corporate or organizations cannot come under Bankruptcy Chapter 13 code. You cannot file Bankruptcy Chapter 13, if your previous bankruptcy petition was dismissed in the preceding 180 days of filing the current case. An individual is not permitted to file Bankruptcy Chapter 13 code unless he has received credit counseling from an approved credit counseling agency 180 days before filing the case.
The Bankruptcy Chapter 13 has a distinct advantage over other Bankruptcy codes for individuals. It scores over Bankruptcy Chapter 7 in several ways. The biggest advantage of Bankruptcy Chapter 13 being you can save your home from foreclosure. But they will have to repay all or a part of the debt as agreed before, over a period of time. Also in Bankruptcy Chapter 13 code, an individual is allowed to reschedule his secured debts over the period of Chapter 13 code. This can greatly help the debtor by lowering the payments to be made. And the best part of Bankruptcy Chapter 13 law is that the debtor will have no direct contact with the creditor and he will make all the payments to a pre-assigned chapter 13 trustee. The trustee will make the payments on his behalf to the creditors.
All said and done let us now understand how the Bankruptcy Chapter 13 works. The debtor has to file the case in the bankruptcy court from the area where he has the domicile or from where he owns a house. The debtor has to file information pertaining to his assets and liabilities, his income and expenditure details and any statements related to his financial affairs. The debtor also needs to produce a certificate from a credit counseling agency, the tax return copies from the latest year when the tax was paid. Then he has to purchase the official forms from any legal stationary stores or download from the internet.
The official bankruptcy forms are used to furnish the details to be produced before the court. The bankruptcy forms related to Bankruptcy Chapter 13 include
- Chapter 12 statement of current monthly income and calculation of commitment period and disposable income.
- Discharge of debtor after completion of chapter 13 plan.
- Order confirming chapter 13 plan.
- Order fixing time to object to proposed modification of confirmed chapter 13 plan.
There is some fee which is charged by the court to the debtor filing the case. The court charges $235 towards case filing fee and $39 for administrative fees. The fees can, however, be paid in installments over a period of 120 days in 4 installments. Once the proceedings start the debtor is assigned with a trustee in order to look after the case. The trustee will evaluate the case and he will be the sole agent through which payments will be distributed to the creditors. The trustee will then schedule a meeting with the creditors in between 21 days to 50 days after filing the Bankruptcy Chapter 13 code. The trustee and the creditor can ask questions to the creditors on his financial affairs during the meeting and he should also propose a plan of repayment of the debts over a fixed period of time. Once the meeting is over, the trustee, creditor and the debtor should come to the court for a hearing on the repayment plan of the debtor.
When the bankruptcy court confirms the repayment plan, it is the duty of the debtor to make the plan work. The debtor has to make regular payment to pay the trustee who will then pay back to the creditor. The debtor has to make necessary changes in the living style so as to adjust with the lower disposable income left in his hand. The only disadvantage of filing Bankruptcy Chapter 13 code is that a record of this case stays with the debtor’s credit report for 10 years from the date of filing the Bankruptcy Chapter 13 case. In such cases the creditors may not be interested in risking money by lending to a person who has already sought protection under bankruptcy chapter 13 case. Well this applies to all the bankruptcy cases.
So before an individual files a case under Bankruptcy Chapter 13, he should be aware of all the above details so that it becomes easy during the course of the proceeding of the case. One should be aware of all the rights which one is entitled to, under bankruptcy norms. Once you evaluate the situation and you feel that its time to file for bankruptcy, go ahead and file the same before you lose your house to foreclosure. Bankruptcy Chapter 13 will surely protect the best interest of any debtor who is wiling to pay back the debt over a period of time.
Resources: uscourts.gov
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