Essentials Of Chapter 13 Of American Bankruptcy Law

What is Chapter 13 of the bankruptcy law? How does it differ to the other bankruptcy

chapters such as 7 and 11? All three chapters are allowable to be invoked by anyone whenever he is having financial problems. Actually, this is a relief method for anyone who is indebted and does not have the capability to pay the debts. This gives a fresh start.

The financial turmoil that had affected the whole world had caused many people to suffer money crisis. Thus repayment of indebtedness could not be done. Collectors haunt these persons causing the latter to suffer more; they have sleepless nights and endless anxiety. Declaration of bankruptcy becomes the most favorable solution. As each chapter has some differences, there also are advantages for each.

Chapter 13 compared to Chapters 11 and 7

Chapter 13 is a plan on how individuals can pay their creditors over a specified period of time. In accordance with its rules, individuals or personal businesses who are buried in debts can reorganize their existing assets or business operations. Just like Chapter 11, this is invoked by individuals and corporations. Here the personal or company assets are sold, the proceeds of which are distributed to the creditors.11 is usually for corporations while 13 is applied for by individuals. The individual will have to comply with certain requirements. One is to have enough disposable income. Another is the financial limit - $360 thousand for unsecured debt and $1 million or mortgages. These amounts are still subject to adjustments depending on the cost of living standards that are acceptable at the time one files for this.

Requirements to file Chapter 13

At the very instant of bankruptcy petition, you should accompany your petition with a bankruptcy plan. If no plan is attached, then it should be resubmitted in the soonest possible time as this is the important and required part for the process to get started. This plan will outline the amount of debt, the liens and the debtor asset and liability status. To get this plan implemented there must be guarantee that the creditors will be paid with an amount that is at least equal under Chapter 7.

Advantages of Chapter 13 over Chapter 7

The major advantage of 13 when compared to 7 is perceived in both the economic and moral viewpoint. Here the debtor can retain his assets and the debt is paid in installments. Your house is prevented from foreclosure and you are still allowed to stay in your dwelling house until bankruptcy is completed. There is option on the part of the petitioner to split up the security interests of the lenders especially for those creditors who charge high interests.

Under the provision of the plan, the debtor will have to pay back the creditor over 3 to 5 years. This is the time frame given for the settlement of the obligations. Repayment starts within 30 to 45 days from the instant the plan is approved by the bankruptcy court. This will give further peace of mind to the debtor because the court will prohibit the creditors to collect the debt. In exchange for non-harassment, the debtor is forbidden to obtain additional loan while the plan is in-force, unless permitted again by the court.

As bankruptcy is a privilege that is difficult to handle by any person who has no experience in this field, it is incumbent upon the petitioner to hire a well-trained lawyer. The chosen attorney should be one who has ample experience and expertise in this field.

by: John Smithes

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