Chapter 13 Bankruptcy Info

As an alternative solution to liquidation under Chapter 7, Chapter 13 bankruptcy is considered a boon in disguise by many. Where the only option that lie before one is to dispose off his assets to meet the existing liabilities, but if you fall under the eligibility criteria cited by law, it is always safer to go for Chapter 13. This clause provides the option to reorganize the current financial position in such a way that the debtor is placed with a less pressurized repayment option. The financial reorganization is brought under the direction of the federal bankruptcy court.

Also called as the wage earner’s plan, the Chapter 13 bankruptcy option is open only to individuals who enjoy a regular flow of income. This option is considered advantageous as it creates a protective sheath to your assets from liquidation under Chapter 7. Anyone with an income falling under the state stipulated limits can become eligible for this financial reorganization.

The process initiates with the filing of a petition for bankruptcy at the bankruptcy court under whose jurisdiction the debtors falls into. The law demands him to present it with the documents reflecting the assets and liabilities, current income and expenditures movement, a schedule of executory contracts and unexpired leases to evaluate the current financial position and a statement of financial affairs.

If the current monthly income is less than the state median, the debtor will be qualified for three year plan of repayment, but where the current monthly income is greater than the existing state median, the plan will be for five years. The moment the bankruptcy petition is filed, it is followed by the automatic stay that prevents the creditors from resuming collection efforts on the amounts outstanding.

But, always seek relief from this clause only as a last resort as the bankruptcy filing gets reflected on the credit report for over seven years. It is always wiser to seek respite through other options like debt consolidation, settlement or debt management before going for Chapter 13 bankruptcy.