Bankruptcy And Choice Of Chapter 13

Bankruptcy had become common recourse of many people adversely affected by the tough economic conditions

. The American Bankruptcy Law had prescribed different ways to go about bankruptcy in order to evade the nagging debt collectors and to have a fresh start. One part of this law is Chapter 13.

Rules of Chapter 13

Chapter 13 of the American Bankruptcy Law had been designed to help heavily indebted individuals and personal businesses to reorganize their financial conditions. The assets and operations will have a new perspective. This is more relevant and similar to the Chapter 11 of the same law which can also be availed by individuals and corporate firms. Chapter 11 is usually the chapter invoked by corporations while private individuals find Chapter 13 more useful to their cases.

In filing bankruptcy, your method of declaring this relief may be different from what had been declared or done by other people. When you file for Chapter 13, you will be required to have enough disposable income in order to push through with the process. In accordance to the law, you will adhere to the financial limits. There is a ceiling for unsecured debt. The secured debt amount is covered by collaterals and this too has limits. The prescribed level of secured and unsecured debts can vary from time to time due to the fluctuating cost of living level at the time of filing of bankruptcy.

A bankruptcy plan executed by the filer

One requirement set by chapter 13 is for the filer to make an arrangement on how the bankruptcy can be undertaken. This specific plan normally forms part of the submitted bankruptcy petition. Its importance is to set an outline of the debts, all liens to properties as well as current status of all assets and liabilities of the debtor. The plan does not take effect until certain requirements are successfully complied with. This will include assurance to the creditor that he will receive the same amount had the debtor applied a petition under Chapter 7.

Advantages of Chapter 13

This chapter when compared to Chapter 7 had several advantages.

Under this chapter, the debtor can retain a big percentage of his salary, assets and other properties. The debt is paid in installments. Another advantage is exemption from home foreclosure where you as debtor are allowed to stay in your property until the bankruptcy is completed. This chapter relieves you of secured debts. You are allowed to split the security interests of your creditors.

Payback period is also set-up and this will be over a period of three to five years. You have to begin paying your creditor within 30 to 45 days from the time the bankruptcy court implements the bankruptcy petition. The court strictly prohibits the creditors to collect from the debtor; this only means that you can no longer be harassed by your creditors. The big disadvantage of this chapter to the petitioner is that the latter is prohibited from acquiring a loan during the life of the specified bankruptcy plan, unless he is permitted by the court.

As filing of bankruptcy and choosing the applicable chapter can be confusing, you need to consult a good and experienced bankruptcy lawyer. It is paramount that your legal counsel had sufficient battles in the bankruptcy court to enable him to fight for your case.

by: John Smithes

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