Is Chapter 13 Bankruptcy Right For You?

By: Jay Anderson

In bankruptcy there are multiple layers or chapters. Chapter 13 bankruptcy is often known as reorganization bankruptcy and also a wage earner's plan. Chapter 13 bankruptcy may be used by individuals along with unincorporated businesses. This will allow the person filing to structure a repayment plan to their particular financial commitments and obligations that will be supervised and also approved by the bankruptcy court. Under chapter 13 bankruptcy you will be given a particular period of time, often three to five years, for you to be able to get your financial debt repaid. Once you have filed for chapter 13 bankruptcy, the existing creditors will not be able to call or harass you about your payments, and will not be permitted to start collections that will go against you.

Chapter 13 bankruptcy and chapter 7 bankruptcy are significantly different. In chapter 7 bankruptcy all of a person's financial debt is erased. In this erasing of financial debt however all of their assets will be acquired in order to pay off the debt the person owes. Comparing these two chapters of bankruptcy, in chapter 13 bankruptcy the debt you owe remains and becomes reorganized. In using this chapter of bankruptcy compared to chapter 7, you will not have to submit all of your assets and you will be able to maintain them.

Some people get the wrong idea of chapter 13 bankruptcy and view it as a debt consolidation loan. The debt you owe will remain but is reorganized and restructured into a simpler repayment plan. The money will be given to the creditors by a trustee appointed by the court. Even though your debt still exists you will be unable to have a contract with creditors and receive phone calls and statements in the mail.

Chapter 13 is different than other chapters because it allows people to keep their house and not have to foreclose. After you start chapter 13 bankruptcy the foreclosure procedure will be stopped and offending mortgage payments will be gone. During the duration of the bankruptcy it is a point to be made that when you own a home you still have to make the monthly mortgage payments.

If there is a substantially high amount of secured debt it may be reorganized and structured more properly so that the payments will be easier for you to make. There are some instances where the interested rate on your payments can be lowered or the extension of the term to allow for smaller monthly payments. By making this extension it will allow for the person paying the debt off to have smaller bills and be able to actually afford making it.

There are limitations for individuals and unincorporated businesses when filing for chapter 13 bankruptcy. The total amount of unsecured debt may not be less than $307,000. The total of secured debt needs to be less than $923,000. In some instances the limitations may be adjusted according to the consumer price index.

In order for a person to qualify for bankruptcy there is credit counseling that must be taken. The counseling must be taken at an agency that is approved by the United States Trustee's office. When taking credit counseling there may be a fee placed but if the fee is too much or you are unable to make the fee the agency will try their best to lower payments to best meet your financial needs.

Chapter 13 bankruptcy is suitable for the person looking to maintain their assets but get some leverage on their finances to get some breathing space. They reschedule a repayment plan that fits your needs so that it will be easier for you to comply and pay for your debts. If you find yourself in a financial situation where you are unable to get out of bankruptcy may be your best option. However, it is not appealing but may pay off in the end so that you can repay your debts efficiently.

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For more information and additional insights about Chapter 13 Bankruptcy as well as getting a free bankruptcy evaluation from a qualified lawyer local to you, please visit our web site at

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