| What is Chapter 13 Bankruptcy? |
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| Written by Alan Alder |
| Monday, 06 July 2009 13:43 |
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The Bankruptcy Code provides for adjustment of debts for individuals with regular income in Chapter 13, and is known as a Chapter 13 bankruptcy. A debtor can keep property in a Chapter 13 bankruptcy while paying down debts over a period of 3 to 5 years.
The Bankruptcy Code provides for adjustment of debts for individuals with regular income in Chapter 13, and is known as a Chapter 13 bankruptcy. A debtor can keep property in a Chapter 13 bankruptcy while paying down debts over a period of 3 to 5 years. Chapter 13 bankruptcy is sometimes called a reorganization or a wage-earner's plan. It allows for individuals to create a plan that will repay all or some of their debts. Under a Chapter 13 bankruptcy, the debtor proposes a repayment plan that calls for installment payments to creditors over three to five years. If the debtor's current monthly income averaged over the last 6 months is less than the applicable state median, the Chapter 13 plan will be for three years unless the court approves a plan lasting longer. If the debtor's current monthly income is greater than the applicable state median, the bankruptcy plan generally must be for five years. In no case may a Chapter 13 plan provide for payments over a period longer than five years. During this time the law forbids creditors from starting or continuing collection efforts. A Chapter 13 bankruptcy offers many advantages to individuals that you cannot find in a liquidation under Chapter 7 bankruptcy. One key advantage is that Chapter 13 allows to individuals to keep their homes when faced with a foreclosure. Individuals can stop foreclosure proceedings by filing a Chapter 13, and they then can cure any amount owed in arrears over the life of the plan. Nonetheless, filers of Chapter 13 must make all continuing mortgage payments during the life of the bankruptcy. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 bankruptcy also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Also, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 bankruptcy protection. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Make sure to read Alan Alder's bankruptcy information regarding Chapter 13 in Nashville. You can learn how to stop foreclosure in Tennessee and stop other creditor actions from an experienced attorney. |