Personal Bankruptcy Questions

Chapter 13 Bankruptcy is the type of bankruptcy where the debtor chooses to draw a plan subject to the approval of the court for the rehabilitation of the debtor’s business to pay his creditors. Individuals who apply for this petition undergo a financial reorganization which is managed by the federal bankruptcy court through a trustee who shall oversee the observance of the procedure. Cases under Chapter 13 Bankruptcy are also called as consumer reorganization or debt adjustment, and the procedure has been called by some as the wage earner’s plan.
It is basic that the individual is an income earning citizen whose monthly earnings is more than the median income of the state where he or she belongs. Through these earnings, a period of three to five years is allowed to pay the creditors provided it is drafted in a plan duly approved by the court and the respective creditors. The plan shall state all the transactions that will be entered into, and the repayment of creditors will start a month to 45 days after the procedure has started.
The burden of proving the qualification of an individual for a Chapter 13 Bankruptcy lies in the debtor’s ability to pay his or her obligations by way of his or her earnings. An individual’s total unsecured debts must not go beyond $336,900.00, and the total secured debts must be limited to $1,010,650.00 as set forth by the Bankruptcy Code.

The choice of filing for a Chapter 13 Bankruptcy has been very much affected by the recent legislation on BAPCPA in 2005 where the legislators have revised the qualifications in applying for a Chapter 7 bankruptcy. But nevertheless, much of what has made bankruptcy in Chapter 13 attractive among financially troubled individuals remains the same.
One of the main reasons for filing reorganization is the provision that you can keep all or some parts of your property as you pay your obligations through your earnings over time. It also grants the ability to stop foreclosures of real property which actually means one can keep his home. Also included in this type is the super discharge for debts gained by way of fraud which is not offered in a Chapter 7 bankruptcy. Collaterals are valued as they would have precedence over other properties that would be subject to the reorganization. In cases where too much interest has been accorded by some creditors on a property subject to the reorganization, Chapter 7 Bankruptcy allows for the division of the security interest which leads to a drastic tapering off of the debt obligation. The Code also provides the prevention of collection activities of “consumer debts” unless the bankruptcy court allows it against co-debtors during the three to five-year period.

It is also essential that the amount of payment as well as the period of the settlement plan relies upon factors such as and not limited to, the worth of the debtor’s property, the amount of a debtor’s income and debtor’s declared expenses.

Click here for more information on Chapter 13 versus Chapter 7 bankruptcy.