By filing a chapter 13 bankruptcy you have the option of developing a debt repayment plan supervised by a law court. The main benefit when you file a chapter 13 is that you are immediately free from legal court proceedings, dreaded collection calls and garnishment court orders.
Chapter 13 bankruptcy explained
When filing a chapter 13 bankruptcy you are actually asking a legal court to establish contact with all your creditors and speak to them on your behalf so that you can make a pause and consider the situation properly. In general, the repayment schedule specifies that the debts included in the list must be repaid during the following five years.
Having said that, a bankruptcy court is free to act as it sees fit and it can also allow more years to repay the debts. To come to a decision, they usually compare what you earn every month to the amount of your monthly expenses. The court then determines if you are eligible for a chapter 13 bankruptcy based on several pre-established rules.
Chapter 13 bankruptcy laws stipulate that you are allowed to file a chapter 13 if your secured and unsecured obligations are not greater than a specific amount of money. A bankruptcy attorney is the expert you most need at this point. He/she will analyze and divide your debts into categories in order to asses if you meet the requisites and are thus eligible.
Filing a chapter 13 bankruptcy
Many of the steps for filing a chapter 13 bankruptcy are the same as when you file a chapter 7. You agree to a monthly repayment schedule that takes into account what you earn and what you spend. You must also complete a credit counseling course which teaches you about budget making and money managing. At the same time, the court appoints a trustee that works personally with you and assists you in getting back on track financially.
When you fill in the information regarding your personal finances, you must reveal everything, absolutely every detail. You have to state all your creditors and income, your properties and how much you spend every month on average.
Bankruptcy chapter 13 grants you freedom from creditors
The good news is that as soon as the bankruptcy lawyer files the bankruptcy chapter 13 you get an automatic stay, which means that your creditors cannot continue with their efforts to make you pay off your debts. No more stress or anxiety about creditor calls. Your attorney and you then write down an acceptable plan to pay off your debts and you submit it to the legal court where it has to be approved.
As stipulated by chapter 13 bankruptcy law you deal with each debt class in a different manner. It is up to the court to decide a priority level and where the first payments go. The law court also establishes how to handle the collateral guarantees attached to the secured debts in the framework of the payment plan.
Although the unsecured debts are listed in the payment plan, it is not compulsory to pay them back within five years. Such a payment plan is based on the principle that you keep a specific amount of money enough for regular living expenses, and use the rest to pay your creditors.
Specific benefits of a chapter 13 bankruptcy
A chapter 13 bankruptcy has specific benefits that a chapter 7 does not have.
The main one is that if your home is already in the foreclosure process you can nonetheless make foreclosure stop.
The repayment plan includes the due payments on your mortgaged home, which implies that you have the opportunity to catch up.
According to chapter 13 bankruptcy rules you can also cut back your monthly payments to pay back your secured debts.
We hope that the above chapter 13 bankruptcy information helps you to evaluate together with your specialized lawyer if a chapter 13 bankruptcy is the best solution for you.