You must have heard or seen much about Chapter 13 bankruptcy. After all, media portals have been frequently discussing things about bankruptcy, in line with the recent economic recession.
But we often find the information contradicting. An internet article may discuss the qualities of Chapter 13 bankruptcy, which will be refuted in a TV discussion. So which of them is correct?
To help you acquire the right information about this debt option, we have summarized the basics of Chapter 13 bankruptcy.
Basic Information on Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is otherwise known as “wage earner” bankruptcy. This means that one of the requirements for this type of bankruptcy is a steady source of income. This is vital since a reliable monthly wage will be the only way by which a debtor can repay some or all of his debts.
Chapter 13 Bankruptcy is also known as reorganization. This option involves restructuring of debts. This allows an individual to use whatever income he may earn in the future just so he can pay off his creditors. This will be done under the supervision of the courts.
In Chapter 13 Bankruptcy, a debtor must propose a credit repayment plan. This plan details how he intends to pay his debts over a period of at least three years. Upon filing for bankruptcy, the terms of the debt will be improved. This change may constitute lower rates of interest or even no interest at all. After all the goal of the repayment plan is to help creditors regain a portion of the money they have extended for credit.
The value that you must repay depends on three things. First is your monthly income. Your repayment plan must be based on a realistic amount that you can pay each month. Second is the total money you owe. Your debt repayment plan shows how much of your original credit you can pay off in the next three to five years. Third is based on a consideration of your unsecured credit. You have to propose a value that is not very far from the payments you could have made if you filed for Chapter 7 bankruptcy. This way you can somewhat satisfy your unsecured creditors.
Who Files for Chapter 13 Bankruptcy?
Most consumers who do not wish to lose their properties prefer this type of bankruptcy. This is because they are allowed to settle their debts without repossession of assets. They just need to enter an agreement to retire their credit under a less pressured repayment program.
The federal laws also set credit limits for those who will file for Chapter 13 Bankruptcy. If you have incurred not more than $1,010,650 in secured debts and $336,900 in unsecured debts, you will be eligible to file for a reorganization bankruptcy.
