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How 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 unsecured debts.

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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