Chapter 13 repayment plan

Chapter 13 repayment plan

Bankruptcy is a tough situation to deal with, but it can also be a great way to reset your finances and get things back on track sooner rather than later. There are many different types of bankruptcy and each one relates to different situations. When it comes to individuals who need to revamp their finances and need to repay their debts and keep their property, chapter 13 is the best option available.

Chapter 13 bankruptcy, also known as “wage earner’s plan”, is a special kind of situation where a payment plan is developed between the debtor and the creditors. The debtor and all of the companies who are owed money work together to find the best way for payment to be made. Once a reasonable plan is created and agreed upon by both sides, the debtor has 3-5 years to pay it off. This type of plan helps debtors to keep most, if not all, of their property, including vehicles and homes.

Before someone can file for chapter 13, however, they have to be eligible for it. Luckily, it is not too hard to qualify. While the totals change from time to time, the debtor cannot have over $400,000 in unsecured debts, or $1,100,000 in secured debts. Unsecured debts are those where no collateral is available to be taken as a form of payment, and secured debts do have collateral attached to the agreement.

Another requirement for chapter 13 is actually very beneficial to the debtor. Anyone who wants to file chapter 13 must go through credit counseling. This helps the debtor gain a better understanding of topics like debt, credit, and payment plans. This requirement basically shows that the debtor is dedicated to learning how to better handle his or her finances so they will be less likely to fall into a bankruptcy situation again in the future.

There are many benefits to filing chapter 13 bankruptcy. The biggest advantage is the placing of a “stay” on a foreclosure. When a debtor is behind on payments for their home, they could have the home taken back from them through a foreclosure, but not when they file chapter 13. This type of bankruptcy ensures that they can stay in their home while they go through the bankruptcy process, giving them a much better chance at keeping their home.

Chapter 13 also allows debtors to repay their debts over the course of many years, and possibly for a lower rate. Usually a lower debt is negotiated with the creditors to ensure that they at least get some of their money from the debtor. In addition to this, most chapter 13 situations are set up to be paid off over the courts of three or five years, depending on the debtor’s ability to make payments.

In addition to these benefits, co-signers to debts may also be protected in the process. Usually if someone cosigns a loan for something like a car or a house, the primary debtor is responsible for payment but the bill could still fall to the co-signer. With chapter 13, the co-signer does not have to worry about being burdened with the debt themselves.

The process for filing this kind of bankruptcy is pretty straightforward, too. First, documents must be filed with a local bankruptcy court, including current assets, debts, recent tax records and proof of credit counseling. Once the process begins, the debtor gets a trustee who will work with them and the creditors on a repayment plan of their debts. All parties come together to discuss the finances and come to an agreement of how much will be repaid and in what timeframe. All of this information is filed with the courts and the repayment plans goes into effect within 30 days.

Once the plan is in place, the debtor is not allowed to take on new debt, such as credit cards and loans, until the plan has been paid in full. However, sometimes new situations arise that are beyond the debtor’s control. In cases like this, the payment plan can be readjusted or the debtor can file for a chapter 13 hardship discharge, wiping out the rest of the debt.

Bankruptcy is never a great situation for a debtor, but it can be a great way to hit the reset button on your finances. Chapter 13 allows for a relatively easy way to get a fresh start and not lose many, or any, of your possessions or property. Always speak to a law firm before filing anything with the courts to ensure that you are getting the best possible deal for your specific situation.

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