How Chapter 13 Bankruptcy is Helpful?

Chapter 7 and Chapter 13 are two common chapters one can use to file for bankruptcy. In Chapter 13 bankruptcy you do not have to forgo your property in order to pay off the debt. Apart from not involving liquidation, there are several advantages of Chapter 13 bankruptcy that makes it a good choice for debtors. Chapter 13 is more complicated than Chapter 7 and one needs to be understand it well before opting for it.

Eligibility

Everyone cannot apply for Chapter 13 bankruptcy. The first criterion to be able to choose this chapter is that you have to prove to the court that you have a steady income which makes it possible to repay the loan. You will also need to prove that you can meet all your financial obligations such as alimony payment, child support etc before you use your income to repay debt. The second criterion is that if you have a high debt you cannot use Chapter 13 to repay the debt.

Duration of the Repayment Plan

Chapter 13 enables you to repay the loan over a long period of time which can take about 3-5 years. However, the duration of the repayment plan will depend upon your income and your debt amount. You can easily find out whether you will have to file for three-year duration or five-year duration simply by finding out whether your average monthly income in the six months prior to filing bankruptcy is more or less than the median income for your state. If it is more, you will have to propose a five-year plan and if it is less than the median income, you can ask for three years.

Restrictions To Be Observed

There are many things which make Chapter 13 different from Chapter 7 bankruptcy – one being that a debtor cannot incur more debt without the approval of the court. For example, a debtor under Chapter 13 cannot acquire a car loan.

Amount To Be Repaid Under Chapter 13

Chapter 13 makes it mandatory for you to repay some debts completely. The debts which need to be repaid in full are called priority debts and can include alimony, child support, tax obligations and wages you owe to employees. Your Chapter 13 bankruptcy plan must also maker provision for you to repay your secured debts (debts which gives creditors the right to own your property or car. While planning for Chapter 13 bankruptcy, you will also have to consider repayment of unsecured debts such as credit card or medical bill. You will have to use your disposable income for repaying the unsecured debts. However, you can repay these debts over a period of time and need not necessarily pay all at one go.

Trustee in Chapter 13

For filing a Chapter 13 you will need a direct point of contact that is also known as a trustee. The trustee will review the payment plan and has the power to question the authenticity of the plan in the court if he finds things to be improper. Once the court approves the plan, the trustee becomes the intermediary between the debtor, the court and the creditors. The main job of the trustee is to take the payment from the debtor and use it to repay the creditor. The debtor cannot directly pay the creditor.

Once you pay all your debts over the specified period of time, all your debts are discharged. You will receive an official discharge notification once you show to the court that you have been regularly paying your alimony and child support.

Attorneyforbankruptcy.com is a leading law firm of California where you can hire most experienced california chapter 13 bankruptcy attorney and tax relief lawyers.