Bankruptcy is a legal process of debt elimination filed in a court of law. The purpose of the same is to relieve individuals or businesses unable to pay their accumulated debts of their financial obligations. The purpose of filing for bankruptcy is to provide a fresh start in one's finances.
Chapter 13 bankruptcy is also referred to as reorganization bankruptcy. This means that someone who has the debts is expressing his willingness to pay the same back, but within a time frame of three to five years. This is preferred by a lot of individuals and businesses that want to maintain their current living standards while they pay off their accumulated debts.
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Filing a Chapter 13 requires the individual to present a bankruptcy petition and list his assets and liabilities. After this, the individual has to present a plan for repayment and the duration within which he or she plans to do so. This is reviewed by all the concerned debtors who check if this can really happen. Once the points of argument and dispute are settled, it is the responsibility of both the individual who has filed for bankruptcy as well as the creditors to follow the reorganization plan laid out.
There are additional confirmation tests that remain before the final reorganization of bankruptcy. The tests are meant to compare the amounts received by unsecured creditors under the plan and the amount they would receive if a Chapter 7 bankruptcy is filed. This is to ensure parity between the two bankruptcy clauses and that the creditors get as much in both. A final test is done wherein the individual?s ability to pay is assessed.
Chapter 13 is most beneficial for those people who wish to keep certain possessions like one?s home. For example, if a consumer has missed the house mortgage payment and is facing the possibility of a foreclosure, it can be stopped by filing for Chapter 13 bankruptcy. This is usually called an automatic stay and allows time for the consumer to catch up on the missed payment.
Chapter 13 bankruptcy advice can be best obtained from an attorney who has great experience in dealing with such cases. However, a word of advice is that one should not file for Chapter 13 bankruptcy unless the conditions are extremely dire. This is because once someone files, the consumer?s credit suffers and is recorded for about 10 years, making it almost impossible to obtain credit in the future.
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