Understanding Chapter 13 Bankruptcy
When it comes to bankruptcy, the number 13 is definitely luckier than number 7, since filing for bankruptcy under chapter 13 ensures that you can hold onto assets such as your home and car.
You will still have to pay part of your future income to your creditors to clear off your outstanding debts, depending on the value of your property, your income and your expenses.
Depending on your particular circumstances, your repayment period could stretch from anywhere between 3 to 5 years. An experienced bankruptcy attorney can advise you on your particular case.
Chapter 13 vs. Chapter 7
Using chapter 13, your bankruptcy attorney will submit a plan to repay your creditors within the specified period, and the court will supervise this plan. Secured creditors have a much better chance of recovering their money than non-secured creditors.
Once the court approves the plan, it will then prevent your creditors from harassing you in any way regarding overdue payments. The difference between filing Chapter 7 and Chapter 13 is that with chapter 7, your assets are taken by the court and disposed of to make payments to your creditors; but with chapter 13, you will have to reorganize your payments to your creditors over a longer period of time.
So while Chapter 7 will your debts in one stroke by selling your assets, Chapter 13 will safeguard your assets, but take away a part of your income slowly but surely for the next 3 to 5 years.
In a nutshell, when your bankruptcy attorney files Chapter 13, you get to keep your assets and have some control over your financial life as you pay off your debts in installments.
Income and Property Matters
If you are an individual with regular income that is more than your expenses, and you have secured debts not more than $1,010,650 or unsecured, liquidated debts of not more than $336,900 dollars, then you are eligible to file for chapter 13.
The advantage you have after filing Chapter 13 is that even though the sword of debt hangs over your head, you now have a viable, concrete plan to slowly pay it off - without worrying about creditors harassing you.
In most bankruptcy cases, consumers have been unable to meet their mortgage payments and the lender has initiated foreclosure proceedings against them. Having a bankruptcy attorney file Chapter 13 will ensure that the proceedings against you are stopped and that you stay in the home that you’ve worked so hard for. However, you will have to make future payments on time.
With Chapter 13, your future payments might also be restructured into smaller ones so that you are able to pay them off easily. You will also have to attend credit counseling classes before filing for bankruptcy.
By consulting a knowledgeable bankruptcy attorney who is familiar with bankruptcy laws, you can decide whether Chapter 13 is best for your situation. If you are earning a regular income, but have just spent too much money at one time, then filing under chapter 13 can solve your repayment problems in the long run.