Chapter 13 bankruptcy allows for reorganization of debt through the establishment of an approved repayment plan. Unlike Chapter 7 bankruptcy which requires debtors to liquidate assets to repay creditors, Chapter 13 allows debtors to retain assets as long as they adhere to the repayment plan.
Debtors must meet Chapter 13 bankruptcy requirements established through the Bankruptcy Abuse Prevention and Consumer Protection Act. According to BAPCPA, unsecured debts must be less than $307,675 and secured debts less than $922,975. BAPCPA also requires debtors to undergo credit counseling through a U.S. Trustee Program agency.
Typically, Chapter 13 bankruptcy extends repayment terms with creditors; allowing the debtor to repay debts over a period of three to five years. A bankruptcy Trustee is assigned to manage the case to ensure payments are distributed to creditors in a timely fashion.
Repayment is of utmost importance if the time period for bankruptcy has exceeded and Chapter 13 is one that should be taken seriously so that the debts are not so much as to make the person unable to pay it otherwise there will be no choice than to summon a Low cost San Diego bankruptcy attorney to sort out the issue.
In cases where debtors are unable to adhere to the repayment plan, the Trustee may petition the court to dismiss the case and cause the debtor to fail out of bankruptcy. When this occurs, a bankruptcy judge can choose to allow the debtor to file for Chapter 7 bankruptcy protection or dismiss the bankruptcy altogether.
If Chapter 13 bankruptcy is dismissed due to the debtor failing out of bankruptcy, creditors can resume collection action. For debtors who file Chapter 13 to stop foreclosure proceedings, failing out of bankruptcy will allow mortgage lenders to move forward with the foreclosure process. In some instance, foreclosure can commence in as few as three days. Therefore, it is imperative that debtors who are buying a home adhere to their repayment plan.
Although debtors can file for Chapter 13 bankruptcy protection without the assistance of legal counsel, this would be ill-advised. BAPCPA is extremely complicated and few people can understand or adhere to the directives. In most cases, filing bankruptcy requires the assistance of a qualified bankruptcy attorney.
Experts suggest interviewing three or four bankruptcy attorneys prior to filing Chapter 13. Prior to meeting with each lawyer organize financial records such as pay stubs, records of other income such as alimony or child support, expenses, financial portfolios and real estate holdings.
Bankruptcy attorneys will prepare and present the bankruptcy petition to the court. Shortly thereafter, a creditor meeting will take place. Creditors who want to be included in the repayment plan must submit their claim within 90 days of the meeting.
Finally, a judge reviews the repayment plan and either accepts, rejects or modifies it. Chapter 13 payments can keep people on a short financial leash. A large percentage of disposable income must be contributed to the repayment of creditors. Debtors are prohibited from incurring any new debt without approval of the bankruptcy Trustee.
Before making a final decision to file for Chapter 13 bankruptcy protection, it is highly recommended to conduct research via the Internet or consult with a bankruptcy lawyer. A good resource for locating information on Chapter 13 is through the U.S. Bankruptcy Courts website.