Chapter 13 – Bankruptcy Basics
This chapter of the Bankruptcy Code provides for adjustment of debts of an individual with regular income. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.
Under this phase, debtors propose a settlement plan to make installments to lenders over 3 to five years. (1) If the debtor’s existing monthly revenue is better than the relevant state median, the strategy generally has to be for five years. In no case may a strategy supply for repayments over a duration longer than five years.
This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making the plan work, and the special chapter 13 discharge.
Advantages of Chapter 13
Chapter 13 offers individuals a number of advantages over liquidation under phase 7. Probably most dramatically, phase 13 provides people an opportunity to conserve their residences from repossession. By submitting under this phase, individuals can quit repossession proceedings as well as might treat delinquent home loan payments gradually. However, they must still make all home loan settlements that come due during the chapter 13 plan on time. One more advantage of phase 13 is that it enables individuals to reschedule protected financial obligations (various other than a home loan for their main residence) and expand them over the life of the chapter 13 plan. Doing this may reduce the settlements. Phase 13 additionally has a special provision that safeguards 3rd parties that are liable with the borrower on “customer financial obligations.” This stipulation might safeguard co-signers. Finally, chapter 13 acts like a consolidation lending under which the individual makes the strategy repayments to a chapter 13 trustee who then distributes settlements to lenders. Individuals will certainly have no direct contact with financial institutions while under chapter 13 protection.
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