The benefits of Chapter 13 bankruptcy

March 07, 2013 (Press-News.org) The benefits of Chapter 13 bankruptcy

Article provided by Law Office of Kevin J. Magorien
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Although the economy has recently shown signs of recovery, many Americans have yet to regain their financial footing. The problems of long-term unemployment and underemployment are still present. As a result, many people--even those who have managed to remain employed--are unable to stay current on their bills. For people in this situation, Chapter 13 bankruptcy may be able to help.

Chapter 13 bankruptcy, also known as "wage earner's bankruptcy", is designed for people who have regular income. In this type of bankruptcy, debts are consolidated and reorganized into a payment plan. The debtor, or person filing bankruptcy, makes affordable monthly payments to their creditors under the plan for a three to five-year period. How much the debtor pays under the plan depends on his or her disposable income.

Benefits of Chapter 13

Chapter 13 bankruptcy has many benefits. Unlike Chapter 7 bankruptcy, it does not require debtors to sell their property to pay off debts. The debtor is allowed to keep his or her property so long as he or she continues to make monthly payments under the payment plan. Additionally, Chapter 13 offers other advantages:
-Help with secured debts. Chapter 13 allows the debtor to extend the payments of secured debts--debts that are secured by collateral such as a car loan--over the period of the payment plan. This allows the debtor to catch up on missed payments and prevent the collateral from being repossessed.
-Halting foreclosure. Like other secured debts, Chapter 13 allows debtors to catch up on arrearages in mortgage payments over the term of the payment plan, stopping foreclosure in the process. This is an important advantage over Chapter 7, which only delays foreclosure in most cases.
-Co-Signerprotection. Chapter 13 protection also extends to third parties who co-signed with the debtor for a consumer debt.
-Alternative to Chapter 7. Chapter 13 May be an option if for any reason the debtor does not qualify for Chapter 7 such as failure to qualify under the Means Test due to income in excess of amounts allowable under this test.

Qualifying for Chapter 13

Only debtors who have unsecured debts of less than $360,475 and secured debts of less than $1,081,400 may file for Chapter 13 bankruptcy. Unlike secured debt, unsecured debt does not require collateral and includes debts such as medical bills and credit cards.

Additionally, to qualify for Chapter 13 bankruptcy, debtors much have a certain amount of income. Otherwise, the debtor's application will be rejected because he or she will not be able to make payments under the plan that are sufficient.

Bankruptcy law is very complicated and full of exceptions. If you are considering bankruptcy as a debt relief option, contact an experienced bankruptcy attorney. An attorney can determine whether bankruptcy is right for you and work to ensure that your best interests are protected throughout the process.