Find Bad Debt Consolidation and Solutions

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is sometimes called a wage earner’s plan. This is because it enables an individual with regular and sound income to reorganize the debt. Under a Chapter 13 plan, the debtor can extend the repayment period while preventing aggressive creditor action.[br]

Chapter 13 Bankruptcy: Is it the Right Choice?

While considering bankruptcy, the most pertinent question is whether Chapter 13 bankruptcy is the right choice? Here are few tips to answer this question:

• Analyze the debt amount: Individuals with a secured debt amount of up to $1,010,650 and unsecured debts within $336,900 can apply for Chapter 13. A secured debt is one that gives creditors the right to take back mortgaged items, such as a home or car.
• Consider income: Chapter 13 is ideal for a debtor with regular income, such as a salaried employee. If there is no fixed source of reasonable income, a bankruptcy court will disqualify the petition.
• Repayment: Based on the two above mentioned factors, carefully consider repayment options. Find an answer to the question – “Is it feasible to repay the entire debt amount in the next five years?”
• Gauge value of assets: Filing a petition under Chapter 13 is particularly beneficial if an individual holds a large amount of non-exempt assets. If an individual files a petition under Chapter 7, all non-exempt assets will be subjected to liquidation. Thus, Chapter 13 provides an escape route to continue holding such assets.

Chapter 13 Bankruptcy: How it Works[br]

A Chapter 13 bankruptcy case follows these steps:

• Individual consults a state-approved credit counseling center.
• Prepares a repayment plan in consultation with financial experts.
• Debtor fills respective forms to file a petition in the local bankruptcy court.
• S/he declares crucial financial information, such as assets, liabilities, income source, bank accounts and taxes, before the court.
• S/he also declares the debt amount and enlists creditor(s) before the court.
• The court analyzes the repayment plan of the debtor in congruence with his/her income level and the debt amount.
• If the plan is approved, a US trustee is appointed to administer the case. The trustee acts as a mediator between the debtor and creditors.
• Once the debt is completely paid back, the individual receives a discharge from the court.

Filing a Chapter 13 bankruptcy petition puts an automatic stay on legal actions or garnishment. One of the biggest advantages of this chapter is that a debtor can prevent his/her home from foreclosure.