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> Chapter 13 Bankruptcy
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often referred to as the ‘wage earner’s plan’. It allows
for individuals with regular income to develop a repayment plan for all or part
of their debts. Under this plan, the debtor (you) proposes a payment plan to creditors
for a 3 to 5 year repayment period. If the debtor’s income is less than the state
median, the plan will be for three years unless the court approves a longer repayment
period.
Advantages:
1) Individuals can stop foreclosure proceedings and may settle delinquent mortgage
payments over time.
2) Allows for individuals to reschedule their secured debt (other than mortgages
on primary residences) and extend them over the plan period. This generally allows
for lower monthly payments.
3) There are special provisions that protect ‘3rd party co-signers’ that are also
liable for the debt.
4) Acts as a consolidation loan where the individual makes payments to a trustee
who then distributes payments to creditors.
One of the most important considerations in filing a Chapter 13 bankruptcy is that
you need to have a steady source of income. Not only must you be able to pay for your living expenses, you must also be able to demonstrate to the court that you can make payments to your Trustee.
The most common debts that are included in a Chapter 13 bankruptcy are mortgage
delinquencies, balances on vehicle and student loans, credit card balances and other
unsecured debts. All outstanding debts need to be included in the Chapter 13 bankruptcy.
Eligibility
Individuals, whether employed, self-employed, or operating an incorporated business,
can request to file for Chapter 13 bankruptcy as long as their unsecured debts and
total debts are under certain statutory amounts. A corporation or partnership may
not file for Chapter 13 bankruptcy.