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Chapter 13 bankruptcy - How to keep assets and repay debt |
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When you're in debt problems and cannot make payments in full or as fast as your creditors want, you may file Chapter 13 bankruptcy. To know what it's all about, take a look at the Chapter 13 bankruptcy information given below:
Chapter 13 bankruptcy definitionUnlike Chapter 7, Chapter 13 bankruptcy doesn't require you to sell off assets for debt payoff. Instead, you make payments under the supervision of the court.
Chapter 13 bankruptcy helps to reduce what you owe or allows for more time so that you can pay off the debt in full. It allows you to follow a payment plan (under the approval of your trustee and creditors/lenders) using which you can pay off the whole or part of your debt in 3-5 years. When to file Chapter 13You can file chapter 13 if you're in any of the following situations:
How to qualify for Chapter 13You can qualify for Chapter 13 bankruptcy if you satisfy the following criteria.
How Chapter 13 Plan worksIt's the debtor who has to propose a payment plan and attach it along with other documents while filing bankruptcy Chapter 13. The debtor may also file Chapter 13 Plan separately but he has to do it within 15 days of the filing. He needs to send a copy of the Plan to each of his creditors for their approval.
According to Chapter 13 rules, the Payment Plan includes 3 types of debts:
Creditors can reject your Chapter 13 Plan only if:
However, the objections can be resolved through negotiation with debtors and the trustee. In case the parties cannot compromise, the judge takes the decision. How much to pay in Chapter 13 plan Your payment in Chapter 13 plan depends upon certain calculations as given below.
When to start payment You need to make the first payment to the trustee within 30 days of filing Chapter 13 (that is, prior to the meeting with creditors). Within 40-45 days of the meeting with creditors, the bankruptcy trustee and judge will confirm whether or not your Plan meets the standards as per Chapter 13 rules. Plan modification & Hardship discharge You can get the trustee's approval for plan modification only under conditions of serious illness or loss of job. However, if you're unable to complete the Plan due to reasons for which you cannot be held accountable, and if modification isn't possible, you can request for a Hardship discharge. In such a case, your creditors should have received as much as they could be paid through Chapter 7. Pros and Cons of filing Chapter 13The pros and cons of filing Chapter 13 are given below.
Pros:
Cons:
Chapter 13 bankruptcy helps you to restructure your debt payments and get current on your loans. Unlike Chapter 7, it has a positive impact on your credit as because you’re trying to repay debts from your income. However, prior to filing make sure you’re well aware as to how it can best suit your purpose. Related Forum Discussions: |
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