Chapter 13
Bad Debt Consolidation by splinder
Filed under Bankruptcy
Chapter 13 of the US Bankruptcy Code provides a reorganization plan for individual debtors. Thus, it is also called as reorganization bankruptcy. Under this chapter, an individual can seek time from the court, usually three to five years, to repay the entire or a portion of the debt. Unlike Chapter 7, the debtor’s assets are not sold to repay creditors in Chapter 13.[br]
Chapter 13: Eligibility
Individuals who can satisfy the Chapter 13 eligibility criteria can file a petition for reorganization. Essential conditions include:
- An individual should have a regular source of income
- Monthly income level should be reasonable enough to repay the debt amount in a specified period of time
- Individuals with a high debt amount are not eligible. Secured debt amount should not exceed $1,010,650 and unsecured debts should not be more than $336,900. A secured debt is the amount that gives the creditor the right to take back mortgaged items, such as a home or car.
Individuals who do not qualify for filing bankruptcy under this chapter have to resort to Chapter 7.
Chapter 13 Repayment Plan
The most important aspect of Chapter 13 is the repayment plan. It is the plan that outlines how the petition filer is going to make payments to creditor(s). The plan is developed in consultation with state-approved credit counseling agencies. The petitioner has to present this plan before the bankruptcy court along with the application forms. The court can approve or reject the plan based on the above mentioned eligibility conditions.
Once the plan is approved, the debtor is liable to pay the debt amount as per the agreed terms and conditions in the repayment plan. However, in certain circumstances the court may allow modifications or relaxation in the plan.[br]
Chapter 13: Discharge
An individual receives a discharge if the Chapter 13 repayment plan is realized. However, an individual has to complete a counseling course with an approved financial counseling center. One has to submit a certificate to this effect before the court to receive a discharge.
For individuals with regular income, Chapter 13 is a better alternate to Chapter 7 for clearing debts. Simply put, this chapter allots a discount time period to debtors, while they continue claim over their property.