What Is A Chapter 13 Bankruptcy?
Many consumers that are bogged down in debt frequently turn to bankruptcy
as a form of restoring their financial status back to a zero balance.
Unfortunately many of these same consumers are confused when it comes to
the difference between a Chapter 13 bankruptcy and a Chapter 7 bankruptcy.
This quick article will explain what a Chapter 13 bankruptcy actually is
and what it does for a consumer that files this form of debt relief.
Before explaining what a Chapter 13 is I want to make sure that you are
familiar with what the definition of bankruptcy actually means. It is
basically a legal process that is filed in a court of law. The reason for
filing this debt elimination strategy is to relieve individuals or
businesses that cannot pay their current financial obligations of those
same debts. This allows them a fresh start on their finances.
A Chapter 13 bankruptcy which normally runs around $185 to file is
commonly referred to as reorganization bankruptcy. This form of debt
elimination is filed by consumers that wish to ay their debt off between a
period of 3 - 5 years. This is a preferred strategy for individuals that
wish to actually keep some of their possessions and have the means to
financially meet their normal living expenses while still having money
left over to pay towards their accumulated debt.
When filing a Chapter 13 the individual will present a bankruptcy petition
which list the consumer's schedule of assets and liabilities. Immediately
following this the person filing bankruptcy will have to present a
repayment plan that is carefully reviewed by the debtor's creditors to see
if it meets their needs. If there are no objections or points of argument
then both the creditors and consumer filing bankruptcy must follow the
reorganization plan.
Additional confirmation tests remain before a reorganization bankruptcy
takes place. One of these tests compares the amount that the unsecured
creditors will receive under the plan to the amount they would receive
under a Chapter 7 bankruptcy. Basically what this means is that all
unsecured creditors must be able to receive the same amount of monetary
compensation under a Chapter 13 as they would for a Chapter 7. A final
test requires that the individual filing bankruptcy must also pay all of
their disposable income into the repayment plan.
A Chapter 13 is especially beneficial for consumers interested in keeping
on to some very important possessions such as their home. For instance if
the consumer has missed several house payments and is facing the scary
possibility of a foreclosure they can effectively halt the foreclosure by
filing for Chapter 13 bankruptcy. This is normally referred to as an
automatic stay. This allows time for the consumer to catch up on missed
payments. If the individual is unable to effectively catch up during this
reorganization period then the foreclosure proceedings will continue as
before.
When it comes to a Chapter 13 or any other form of bankruptcy it is highly
recommended that an attorney who is knowledgeable in bankruptcy law be
consulted in order to receive the most accurate information. One
additional note - although a bankruptcy can restore an individual's
financial status it does so with the high price of that same consumer's
credit suffering a blemished record for about 10 years making it difficult
to obtain future credit when needed.
Timothy Gorman is a successful webmaster and publisher of
Debt-Relief-Solutions.com. He provides more debt relief, consolidation and
bankruptcy information that you can research in your pajamas on his
website.
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