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Home / Finance
All You Need To Know About Chapter 13
By:Kris Koonar
When people file for bankruptcy under Chapter 13, their main aim is to get an opportunity to refund few or all the debts on better terms i.e. lower or no interest. In comparison to Chapter 7, which includes liquidation of assets, the Chapter 13 process allows debtors to use all their income for future pay off. This process applies to debtors who have a regular income and can request for reductions or adjustments.
According to the United States Bankruptcy Code, debtors are given a ceiling time of 5 years. The debtors are expected to repay within the given time period. The attorney safeguards the interest and the courts supervise the entire process.
How Does Chapter 13 Bankruptcy Work?
While the court approves new interest free plans for the repayment, debtors are allowed to keep the property. A written plan containing all the details of transactions and their respective duration is created for future reference. Repayments are expected to begin with thirty or forty five days after the case commences. Incase of the Chapter 13, the transitory stage of paying the trustees is eliminated.
However, in some cases people prefer to involve a trustee who takes care of the disbursement of money to the creditors according to the given plan. In addition, the creditor should strictly adhere to the repayment plan approved by the court. They are prohibited from collecting any claims from the debtor. Attorneys are very helpful in such cases, as they know the case well and can suggest and prepare a plan to suit the client.
Advantages of the Chapter 13
Opting for a Chapter 13 has its own advantages. In comparison to the Chapter 7 Bankruptcy, Chapter 13 has the full discharge option, which is not relevant in the case of the former. For instance, if a debtor completes all obligatory payments according to the plan he is allowed a full plan discharge. Attorneys guide in cases where the debtor is clueless about the technicalities of the process.
Another distinctive advantage of the Chapter 13 is that if creditors happen to disapprove of it, a repayment can be initiated. Of course, this can be done only after approval from the court. Besides this, the court also has the right to allow a creditor to file an objection if and when they have one.
Who Can File For Chapter 13 Bankruptcy?
A common and important criterion in regard to the Chapter 13 is that they should have a regular income. In addition to this there are some other criteria, which are better explained by the respective attorneys of the debtors.
How can a person file for Chapter 13 Bankruptcy
Filing for Chapter 13 Bankruptcy involves the following:
. Make sure Chapter 13 is the best solution for you.
. Formulate a budget.
. Refer to previous individual cases to gauge if you have to file for a Chapter 13 bankruptcy or whether it can be settled by the other means.
. Chalk out and put into practice ways of doing business with secured creditors.
. Create a chapter 13 plan and fill out the forms.
. Pay the filing fee and complete all processes, including filing the pleadings and forms.
. Attend meetings with the creditors and court hearings.
Obtain a discharge once all the payments have all been made and the current plan ends.
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