Chapter 13 bankruptcy
Investigating Chapter 13 Bankruptcy
If you feel you could repay your debts, if only you had some more time, then Chapter 13 bankruptcy might be the right choice for you. Chapter 13 is a court-supervised payment plan specifically designed for a debtor and their creditors. Filed by approximately one quarter of individuals who pursue bankruptcy, Chapter 13 is also known as a wage earner's plan, as it allows the debtor to work with the court to pay off all - or at least the majority of - their debt. Creditors will agree to Chapter 13 bankruptcy because they are usually able to recover a greater percentage of the debt through payment, rather than relying on the liquidation of assets to repay debt.
Because the debtor is working continuously to pay off his or her debt with the Chapter 13 plan, it can take much longer, even years, for debt to be cleared than if the debtor pursued Chapter 7. However, since none of the debtor's assets are liquidated, he or she is usually allowed to keep the house and other assets that might otherwise have been sold by the court.
Declaring Chapter 13 bankruptcy requires strict attendance to financial planning, as the court will monitor all your income and expenditure, and has the ability to prohibit spending on anything it decides is nonessential. The court, under this filing, may also deduct a certain amount from your wages to help pay off the debt.
There are consequences of filing for Chapter 13 bankruptcy. The filing will remain on your credit record for up to ten years after the initial filing. The good news is that there are ways to improve your credit rating through court-established programs. And if you managed to pay off the majority of your debt - around 75 percent or so - some courts will even offer money management courses and other resources to help you learn to improve your credit rating.
In order to file for Chapter 13 bankruptcy, you must have a regular source of income, which must be high enough to pay all your monthly necessities, with enough left over to make regular payments to the bankruptcy court. Stockbrokers and commodity brokers are not eligible to file for Chapter 13. Any secured debt (where the creditor has an interest in your property, and may take control of any related collateral) cannot exceed $1,081,400 and unsecured debt must be less than $360,475. These amounts are regularly updated to reflect the consumer price index so be sure to check them with your attorney.