Bankruptcy in accordance with Chapter 13 of the United States Bankruptcy Code applies to a debtor who uses the bankruptcy process to settle their debts in full or a portion of these. Usually, the debtor would seek to pay their obligations with their creditors using their future income. This type of bankruptcy proceeding will only apply to someone with a monthly income that allows them to leverage this income with reduced payments of their debts.
Unlike the bankruptcy process under Chapter 7, filing for bankruptcy under Chapter 13 does not involve the liquidation of all debtor's assets. This bankruptcy process is actually a restructuring of unpaid obligations for as much as 5 years. This is done through the court's direct control and supervision.
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With bankruptcy through Chapter 13, the debtors can retain their property. There is simply a court-supervised process of debt repayment without interest. This is guided by a repayment plan that shows the specific details about the repayment like the type of transactions and schedule of payment.
Under the plan, the debtor is tasked to repay creditors about thirty to forty-five days after the case has commenced. There will be no trustee who will be appointed by the court as in Chapter 7 bankruptcy. So, the payment will go straight to the creditors.
However, there are some instances where the repayment scheme will involve a trustee who ensures the disbursement of money to the creditors according to the plan. Creditors are prohibited from collecting payments beyond those terms that were agreed upon in the repayment plan. It is best to seek professional help from your attorney in the preparation of a suitable repayment plan.
There are two advantages of Chapter 13 bankruptcy in comparison with Chapter 7 bankruptcy. Under Chapter 13, the debtor can choose a full discharge option upon full payment of the debts. But there are exceptions to this option, which you can ask your attorney about when needed. The other advantage is that the repayment plan can happen with or without the creditor's consent. What is necessary is the court's imprimatur to this plan. However, creditors are allowed to object to this plan in order to show fair treatment among the parties.
The person who is allowed to file for Chapter 13 bankruptcy is someone who is regularly employed along with a monthly compensation. Additional requirements are also needed for filing a Chapter 13 bankruptcy case. It is best to ask your attorney regarding these requirements.
There are specific steps for filing a Chapter 13 bankruptcy proceeding.
1. Consider Chapter 13 bankruptcy closely and see if this is the most suitable answer to your problems.
2. Complete a budget that shows your liabilities and required payments.
3. If you have various debts with different creditors, try to determine if a Chapter 13 bankruptcy is necessary.
4. Deal with secured creditors according to your implementation plan.
5. Come up with a Chapter 13 plan, and start the process of filing the necessary pleadings.
6. Settle your court fees like filing fee.
7. Whenever the court sets meetings and your attendance is required, it is best to be there for meetings with creditors, the court, and the like.
8. After paying your obligations in full, make sure that you have a discharge and terminate the repayment plan.
If you have additional concerns, it is important to ask an attorney for legal advice. Filing for bankruptcy is not an easy decision to make so it is best to have the right guidance from the professionals on whatever future course of action that you intend to take.
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