subject: Chapter 13 Bankruptcy - Reasons For Using [print this page] Amongst other things in life, one can be sure that politics and business are constantly subject to change, not simply because of the relationship they have with each other, but also because of world events.
Sometimes in the Western world we become complacent, making hay whilst the sun shines and paying little or no regard to the inescapable truth that eventually things will change. This is especially true of economies, and in reecent times we have perhaps seen the results of growing complacent.
As a result of so many people losing their jobs and businesses in the recent economic slowdown, bankruptcy is now a real possibility for many people, and many are looking for sound finacial advice, not leasr about bankruptcy.
Chapter 13 was designed to ensure that all unsecured debt is repayed if the debtor is deemed to have sufficient income to do so. The court rescedules debt repayments etc, and the debtor is then given a legally binding repayment plan which is a series of payments spread over three to five years.
This may sound fair and reasonable, and in a strict moral sense it is, however the criteria on which how much the debtor can afford to repay each month varies from state to state, and often leave the debtor with very little money to live on.
Chapter 13 can be advantageous however. For example, if a business or an individual has fallen behind on payments due to short term cash flow problems, chapter 13 gives them the opportunity to catch up. In addition, unlike chapter 7, no property is sold, so particularly in the case of a business, keeping the assets intact means that the business can operate as normal.
Once chapter 13 is filed, no one who is owed money can press for forclosure. If a business for example, owes money on capital equipment, this means that they can keep it, subject to the repayments included in the repayment plan being met. The outcome is that the business can therefore continue to do business with no loss of key assets, and the creditors will eventually get paid in full, rather than potentially lose money in a chapter 7 liquidation case.
The alternative chapter 7 bankruptcy, whilst the most popular form of bankruptcy for individuals, is less welcome for many businesses. This is because chapter 7 is an enforced sale of assets, which often results only in partial repayment to the creditors and destroys the business, everyone loses. Chapter 13 can be a lifesaver for both the business and the creditors.
