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about consolidating using chapter 13?
Chapter 13 bankruptcy, also known as Debt Adjustment of
Individual With Regular Income, is the second most common type
of bankruptcy. The purpose of Chapter 13 bankruptcy is to pay
one's debts in an orderly fashion as opposed to wiping the debt
out as in a Chapter 7 case.
There are certain debt situations where a Chapter 7
bankruptcy is not in your best interest. In those situations,
you want some breathing room to catch up with your payments.
Chapter 13 is suited for those situations where you are best off
paying your debts but you need more time than your creditors
will allow. Most people who file under Chapter 13 do so because
they have fallen behind on their mortgage payments and are
facing the possibility of foreclosure. In such situations,
bankruptcy law allows debtors up to three years to pay up the
arrearage while maintaining their regular payments. Let us say
that you were unemployed for six months and during that time you
feel behind on your house payments and the mortgage company has
demanded that you pay the $5,000 in back payment within 20 days
or else they will foreclose. Under a Chapter 13 bankruptcy, the
law allows you 36 months to pay off the $5,000 arrearage while
you keep up the regular monthly payments. Obviously, you need to
show evidence of sufficient income to pay both the regular
payments and the new plan payments.
The laws governing Chapter 13 bankruptcy can be found in
Chapter 13 of the bankruptcy code also know as Title 11 of the
United States code. Since Chapter 13 bankruptcy is characterized
by a repayment plan, this chapter deals mostly with the Plan. Sections
1301 to 1307 deals with such issues as rights of co-debtors, the
trustee, the debtor's right to engage in business and the
conversion and dismissal of cases. Sections 1321 to 130 deal
with the repayment plan and covers filing the plan, contents of
the plan, modifications, the confirmation hearing, plan
payments, and the discharge of unpaid debts.
Should you file Chapter 13 bankruptcy? That depends on the
nature of your debts and on your objectives. If your debts are
mostly credit cards and unsecured debts, file Chapter 7. If you
are behind on your house payments and need several months to
repay the arrearage, file Chapter 13.
Unlike Chapter 7, there is no time limits on how often a
person can file Chapter 13. This makes sense since the goal is
to pay one's debts, not to discharge them. The process for
Chapter 13 is much like that for Chapter 7 except that there is
the repayment Plan. In addition to the same procedure as in
Chapter 7, Chapter 13 involves filing a plan and having that
plan approved by the court at a confirmation hearing.
The process starts with the preparation and filing of the
documents. After that, a trustee is appointed to administer the
bankrupt estate and to ensure the smooth and equitable
application of the law. Approximately four weeks after the
commencement of the case, the debtor appears for the meeting of
the creditors. There is also the confirmation hearing at which
the bankruptcy judge approves the Plan. Once the Plan is
approved, the debtor makes monthly payments through the trustee
who disburses it first to the secured creditors and then to
unsecured creditors, if the Plan calls for the payment of
The case is closed when the Plan has been fully implemented
and that could be in three years, which is the standard length
of the Plan. For good cause, the court may consider a five year
plan, five years being the maximum length in any case.
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