subject: Chapter 13 Bankruptcy Explained - With Advantages And Disadvantages [print this page] Financial crisis, when at the worst level, may compel a debtor to resort to petition for bankruptcy. But then, not anybody can be granted relief under the bankruptcy law. There are conditions that will pre-qualify you to this debt reorganization. Generally, the two most sought form of bankruptcy petition will be under Chapter 7 (liquidation or straight bankruptcy and Chapter 13 (reorganization). The other two are under Chapter 11 and Chapter 12 (family farmer reorganization). Not being able to qualify under Chapter 7, you can file under Chapter 13, subject to the qualifications set forth under this law.
Chapter 13 bankruptcy is a way of organizing your debt. This is your tool to repay your creditors under conditions that is favorable to the debtor. Here, the law allows for the debtor's payment of the debt, a law that allows the debtor to retain properties that are already delinquent in payments. This is corollary to suspension of foreclosure proceedings of the debtor's house or residential building. But the debt is not condoned because a repayment plan will be set by the bankruptcy court.
One important requisite to be able to avail of Chapter 13 is the debtors' disposable income that can fund the plan of repayment in a period of 3 - 5 years. The debtor heeds to have a currently consistent and viable source of income. Another qualification is on the limit of debt - $360,475 for unsecured and $ 1,081,400 for secured. Short of the amount of secured and unsecured borrowings will disqualify the debtor from eligibility of this Chapter 13 relief.
Disadvantages of Chapter 13
Your record of being delinquent borrower is published on individual's credit report and stays there for a period of 10 years. Moreover, the debtor is prohibited from obtaining additional credit, unless approved or permitted by the bankruptcy court.
Advantages of Chapter 13
While the bankruptcy is in force, the creditors cannot collect from the debtor unless it is made through the herein relevant court. The debtor keeps outstanding properties such as house and car and foreclosure is suspended until its reinstatement after bankruptcy has been completed. The debtor is allowed to super discharge his debts of kinds which are not possible under Chapter 7. The credit co-signers who are in essence co-debtors, are spared from collections of debtor's borrowings. This suspension lasts until the duration of the case. This is big relief for the co-signor.
A plan of repayment is set and to be complied by the debtor. This plan is a detailed treatment of the total debts. The repayment is scheduled in a manner that the debtor is able to pay; it is set-up on the basis of debtor's current paying capacity.
