Chapter 13 Bankruptcy: A Path To Financial Recovery

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Chapter 13 bankruptcy is one viable method of financial recovery for those who are struggling to make ends meet. The purpose of Chapter 13 bankruptcy is to allow debtors to restructure debts and repay them over an extended period of time. The process is conducted through a repayment plan. How much one pays depends on income, the amount and types of debts owed, and one’s monthly expenses.


Within the processes, child support claims, alimony, back taxes and a few other legal debts are given first priority. Then, mortgages, secured debts and car loans are addressed. Unsecured debts are considered last. Repayment plans last either three or five years, depending on one’s income and family size. Once debts have been satisfied according to the terms of the repayment plan, the bankruptcy case can proceed for discharge.


Benefits of Chapter 13 bankruptcy

Legal fees are manageable: A benefit of the process is that lawyers are usually paid on an installment basis through the plan. This makes it easier for filers to manage fees.


Filers may keep their homes: One major advantage of Chapter 13 is that it offers filers an opportunity to save their homes. Specifically, the foreclosure process can be stopped and filers may address delinquent mortgage payments within the payment plan. In this period, filers must still make all mortgage payments that come due.


Filers can reschedule secured debts: Another advantage of Chapter 13 is that it allows individuals to reschedule most secured debts, extending payments over the life of the Chapter 13 plan. Doing this may lower installment amounts, making payments easier to complete.


Filers do not have to deal with creditors: Under Chapter 13, filers make payments to a Chapter 13 trustee who subsequently distributes payments to creditors. This means that individuals do not have direct contact with creditors under the process.


These are just a few of the advantages that come with the process.


Who can file for Chapter 13 bankruptcy?

According to bankruptcy laws in the United States, any individual is eligible for Chapter 13 relief as long as the individual’s unsecured debts are less than $360,475 and secured debts are fewer than $1,081,400. It is important to note that these amounts are adjusted to reflect changes in the consumer price index.

There are a few other conditions of eligibility that a well-experienced Chapter 13 attorney can explain to the potential client.


Ultimately, initiating the Chapter 13 process can be complex. It is best to have the legal support of a qualified bankruptcy attorney by your side. A lawyer can help you assess your financial status and develop a recovery plan that works for you.

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