Chapter 13 Bankruptcy permits the people to undergo a kind of financial reformation administered through a federal or centralized bankruptcy court.
What Is It?
When a person files for Chapter 13 Bankruptcy, his prime aim is to get a chance for paying back some or the entire debt with lowered or zero interest rates. Unlike the Chapter 7 Bankruptcy wherein you liquidate your assets, Chapter 13 Bankruptcy involves reorganization of debts allowing the debtors to make use of their income that they might earn in the future to repay the creditors. Thus, going for Chapter 13 Bankruptcy is relevant or apt for the debtors, who have a regular source of income and can afford to pay off the debt according to the plan. The code provides the debtors with a period of five years during which they have to pay back their creditors. Though an attorney will secure your interests in this bankruptcy code, the courts administer the entire procedure.
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How It Works?
Even though the debtors are permitted to keep all their assets, the court acknowledges a fresh zero-interest repayment plan. In addition, a written plan is drafted stating the details of every transaction that will take place along with the duration of the same. The repayment process must start within a period of 30-45 days after the case begins. The temporary phase of you paying a trustee, who in turn pays to the creditor as seen in Chapter 7 Bankruptcy code is generally exempted from Chapter 13 Bankruptcy.
However, in certain cases, individuals may take help of a trustee to carry out the process of distributing the money to all the creditors as stated in the plan. Moreover, according to the laws, creditors need to rigorously follow the repayment plan acknowledged by court and are also not allowed to gather any types of claims from debtors. Here, the attorney has to come up with a fresh repayment plan that will best suit your circumstances.
One of the best advantages of Chapter 13 over Chapter 7 is the entire discharge option that you get, which is not valid under the Chapter 7 Bankruptcy. For instance, in case a debtor makes all the essential payments mentioned in plan, then he/she is offered with a full plan discharge option. There may be a few exemptions here and your attorney will advise you about that.
Another great benefit of is that the repayment plan may be drafted even if your creditor disapproves for the same, but you need to necessarily have the court's approval. However, for enabling fair proceedings, the court permits the creditors to file for an objection if they have one.
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