Chapter 13 Bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Debtors, whose monthly income is less than the applicable state median, propose a repayment plan to make installments to creditors over three to five years.
Chapter 13 Bankruptcy offers individuals a number of advantages over liquidation under Chapter 7 Bankruptcy. Perhaps the most significant advantage is that individuals get the opportunity to save their homes from foreclosure.
By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the bankruptcy proceedings on time.
An individual cannot file for Chapter 13 Bankruptcy if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court.
They also cannot file if a previous petition was voluntarily dismissed after creditors sought relief to recover property upon which they held liens.
A case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence.
Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executor contracts and unexpired leases; and (4) a statement of financial affairs.
Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then, over a reasonable period of time, bring any over-due payments up to date.
Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition.
Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 15 days after the petition is filed.
A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan.
If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral.
If the obligation underlying the secured claim was used the buy the collateral (e.g., a car loan), and the debt was incurred before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral.
Recovering from bankruptcy takes time, but with a good plan in place, you can emerge from it stronger. If you have managed to save your home, and have employment, then you can gradually rebuild your life.
Live within your means, and seek advice from a financial expert. Having help to make the right decisions will give you the freedom to travel down a new road, free from debt.
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