Chapter 13
Bankruptcy

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File Bankruptcy? Chapter 7? Chapter 13? There is a better way.

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Chapter 13 Bankruptcy

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Chapter 13 is the reorganization of an individual consumer's debt with a new payment schedule. If you have too much disposable income to qualify for chapter 7, or have assets you want to protect, you may want to consider this code. Your debts must be below a certain level and you must have steady income.

With this chapter the debtor reaffirms to pay all or a part of their debt. The amount of repayment can range from 10% to 100% depending on the debtor’s income and the composition of amount owed. This code allows the debtor to restructure their payments and set up a new payment schedule (usually 3-5 years) that is more manageable. 

For an individual to qualify under this code unsecured debt may not exceed $250,000 and secured debts $750,000. Payments are made to secure creditors first to the extent of their secured interest and priority. Non priority creditors may be partially paid- credit cards and some taxes etc. In general, creditor approval is not required. Secured creditors can object to the repayment plan however, the court can force acceptance. (Cramdown)

This form of bankruptcy is used when the petitioner has property they want to keep like a mortgage that is about to be foreclosed on and other non-exempt assets that would be liquidated under chapter 7. Filing under this code will also halt all collection and foreclosure proceedings (including IRS) and allow the debtor to catch up on their payments and reinstate their original agreement. Your payments will be made to a Trustee who will disburse them in a manner called for in the court-approved plan. During this time the Trustee will have control over your (personal) finances and any credit-related matters will have to be cleared through him.

There is one alternative that does not involve creditor meetings or ceding control of your finances to a Trustee, and can be accomplished from the comfort and privacy of your own home. Click on the link below for a better alternative:

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