People who file for Chapter 13 bankruptcy are given a repayment plan that is under court supervision. Depending on the debtor’s means and objectives, the amount paid to creditors might range from nothing to 100%.
The plan shields the debtor from collection efforts throughout the legal proceeding and dismisses any remaining balance of dischargeable debts at its conclusion.
Why claim bankruptcy in order to pay?
In Chapter 13, the debtor may order creditors to adhere to a debt management plan. All creditors are required to follow the plan once the court rules that it is compliant with the law, whether they like it or not.
- No creditor may file a lawsuit.
- Runaway interest ends.
- The scheme will be enforced by the court against disobedient creditors.
- There is no tax due at age 13.
Even some obligations, like as marital property debts, that cannot be dismissed under Chapter 7 are covered by the Chapter 13 discharge. Debtors may use this effective technique to take back control of their finances and make a real fresh start. Chapter 13 gives the debtor time to pay obligations that cannot be dismissed in either chapter, such as current taxes or overdue child support, to correct mortgage defaults, and to get rid of the portion of liens that exceed the asset’s initial worth. Creditors cannot opt out of the plan, in contrast to credit management schemes outside of bankruptcy. Consider Chapter 13 to be a court-mandated debt management strategy.
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Who ought to think about Chapter 13?
Debtors decide to submit a Chapter 13 repayment plan when
- They have obligations that are not forgiven under Chapter 7
- They have liens covering the debt they owe for their automobile or house that are greater than the value of the assets.
- their assets are worth more than the exclusions that are provided
- their money might prompt a serious abuse objection
The Chapter 13 plan can only offer partial payment to unsecured creditors; it is not required to pay off debts in full.The confirmation tests affect how much the plan must pay creditors. The Bankruptcy Code does call for the full payment of priority claims. Family support and recent taxes are the two most frequent priority demands.
Who can file under Chapter 13?
Chapter 13 filing requires that you be
- a natural person with no companies or partnerships
- a monthly income that exceeds your necessary living expenditures
- liquidated debts of no more than $360,475 in unsecured debts and $1,0181,400 in secured obligations.
A liquidated debt is one for which the debtor’s outstanding balance is known or easily calculable. A loan is an example of a liquidated debt, although the damages due from a car accident are often not liquidated until a judgement is rendered.
While Chapter 7 bankruptcy can only be filed once every eight years, Chapter 13 bankruptcy can be filed even if you received a discharge in a Chapter 7 case that was filed at least four years ago.