Chapter 13 Bankruptcy

Jessica · Last edited by Jessica on Fri Nov 18, 2005 2:23 am

Chapter 13 bankruptcy is a common form of bankruptcy filed by debtors having regular source of income or those who are self-employed. The U.S Bankruptcy Law does not allow business organizations to file under this section. Chapter 13 Bankruptcy, better known as reorganization bankruptcy, enables debtors to reorganize their finances by paying off their debts under a suitable pay-back plan so that an individual becomes debt free within 3 to 5 years.

How can you file for chapter 13?
The debtor has to file a bankruptcy petition with the court listing his assets and financial liabilities. The debtor then files a repayment plan with the court. The payment plan is followed only when the bankruptcy trustee appointed by the court approves it. The creditor and the trustee have the right to object to this plan.

Eligibility:
With the new bankruptcy law coming into effect, debtors willing to file bankruptcy will have to qualify through the Means Test which helps to determine the type of bankruptcy one should file. The Means Test takes into account the income level of the debtor. One can qualify for Chapter 13 if his income level for debt payments over the 5 year term is $10,000 or more, that is, he has to earn above the median income level to file under Chapter 13. Under the new law, any debtor having at least $1667.67 per month as the calculated income available for debt repayment can file under this section of the bankruptcy Law.

There have been cases when the debtors have missed payments on secured debts against his property. Chapter 13 becomes an ideal option in these cases. It helps debtors to catch up with the payments through a suitable pay-back plan suited to his income and liabilities. Under this section of the U.S bankruptcy code, debtors can also avoid foreclosure which is often called on by a lender when the borrower fails to make the payments in time. But if he is unable to catch up with the payments during the reorganization period, then has to undergo foreclosure after the period ends.

The repayment plan would demand that the debtor pay down his secured debts up to the value of the property. In case the debt amount exceeds the property value, the excess debt will be included within the unsecured debt. The monthly payments are determined by the amount that the debtor can afford to pay after paying his living expenses (including insurance, mortgage payments etc).

Benefits:
Chapter 13 bankruptcy helps individuals get rid off debt collection activities, allows them to keep their real estate and personal property, and provides a way out to pay down their debts through reduced payments. Moreover, the time displayed by Chapter 13 on the credit report is less, that is 7 years. So it takes less time to rebuild a debtor's credit. Debtors filing under this section can also get rid off tax liabilities including those that are due to late filing, not filing and frauds. But if the tax debt is recent, then it has to be repaid in full.

However if a debtor under Chapter 13 bankruptcy misses any payment under the repayment plan, then the court may dismiss his case. Moreover, debtors filing under this section may not get high credit limit and they may be charged high interest rates. The debtors may have to pay larger points and down payments while getting mortgage loans.

But any filing under this chapter has less negative impact on the credit report compared to Chapter 7. Debtors filing this Chapter will be given better credit rating and preference other than those filing Chapter 7. This is because the credit reports reflect that the debtors have at least tried to resolve their debt problems. Moreover, debts not dischargeable under Chapter 7 and others can be discharged through Chapter 13.

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Guest 0.10 Dollars($)

How much do I have to pay if I file chapter 13 bankruptcy?

Samantha · Posted: Wed Nov 09, 2005 3:57 am Post subject: RE:

Hi Jaret,

Welcome to the forums.

When you file a bankruptcy you will be charged $189 and chapter 13 trustee will charge a fee of 10 percent on all the payments made under the paln. Plus the fees of attorney of debt relief agency.

Best of luck,
God Bless You.

Thanks,
Samantha

Guest 0.10 Dollars($)

IS IT POSSOPLE TO GET A MORTGAGE LOAN WHILE IN A CHAPTER 13 HAS BEEN 1YEAR ON A 3 YEAR PLAN

blue · Posted: Mon Jan 09, 2006 3:54 pm Post subject:

Hi,

You can refinance your mortgage after one year of a chapter 13 case provided you have made your plan payments in time. This time frame varies from lenders to lenders.

You are allowed to refinance as long as you are not getting any funds at the closing. Consent from the Trustee may be required.

Regards,
Blue

Guest 0.10 Dollars($)

Hi,

You may be able to get a high rate loan within six months after bankruptcy. It will be better to wait for until you qualify for a FHA loan which you may get after two years.

Murphy

Guest 0.10 Dollars($)

If I have $35,000 debt, and bring home around $3,500 a month of income and choose to file Chapter 13 how much would my monthle payments be and for how long?
Thanks

Caron · Posted: Sun Aug 27, 2006 8:04 pm Post subject: RE:

Hi Chris,

Your monthly payments will dpend upon the repayment plan that you will have to submit to the court under the supervision of the trustee appointed by the court. The creditor and the trustee will decide upoon your payments depending upon the debt you will pay for.

Thanks,

Caron.

Guest 0.10 Dollars($)

Hi,

As Caron has said, the amount of payments you would be required to make on a monthly basis as per your plan would largely depend on the amount you will be able to afford after paying for essential living expenses.

Farrelly

Guest 0.10 Dollars($)

can most people quailify for chpt 13 and can a home equity loan be reduced

Caron

Hi Jill,

Whether one qualifies for Chapter 13 will depend on his financial strength to pay off debts. This is better determined by the Means Test. Get more on insight on this issue from:

http://www.mortgagefit.com/discuss/about705.html#filebankruptcy
http://www.mortgagefit.com/bankruptcy/chapter7-chapter13.html

Thanks,

Caron.

Guest 0.10 Dollars($)

Yes, a home equity loan can be reduced in Chapter 13. In fact, this kind of bankruptcy lowers the overall debt level of a debtor and helps him repay his debts by a repayment plan.

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