Chapter 13 bankruptcy basics - from the definition to the benefits.
The majority of people filing for chapter 13 bankruptcy are not the wealthy trying to cheat the system. Statistics show that the average person filing for bankruptcy earns $22,000 per year. There are many who have suffered a significant period of unemployment before filing. What are the implications of Chapter 13 bankruptcy? This article answers the basics of what Chapter 13 bankruptcy is?
Any person can file for chapter 13 bankruptcy. They agree to pay back some of their debt through selling an asset. This option depends on the circumstances and each case should be discussed with an attorney. Chapter 13 requires that the debtor have a regular source of income. This could include self employed debtors, pension income, disability, welfare, unemployment and disabilities benefits. It also includes child support benefits and an unemployed debtor filing jointly with a spouse that has a regular income. For Chapter 13, a debtor must have no more than $250,000 dollars in unsecured debt (this is credit cards, hospital bills, etc…), and there typically can not be more than $750,000 dollars in secured debts (car loans and mortgages). Now that we have the basics on Chapter 13 bankruptcy here are a few significant things to remember:
Chapter 13 can stop a house foreclosure, help you to make up all the missed mortgage payments and keep the house. Another benefit of paying off taxes through your chapter 13 plan is to stop the interest from accruing on the tax debt. /li>
By filing Chapter 13 bankruptcy papers with the court, it stops creditors from calling you. When you file for Chapter 13 bankruptcy an automatic stay goes into effect. This immediately stops your creditors from demanding what you owe them. For a set amount of time, creditors cannot legally take your wages, empty your bank account, go after your car, house or other property, or cut off your utility service or welfare benefits.
Chapter 13 is often used to buy time. An example of this is when you are behind on your mortgage payments and your home is going to be foreclosed on. By filing Chapter 13 bankruptcy papers, you can try to sell the house before the foreclosure.
There is a good amount of discipline involved in Chapter 13. With the whole length of your case, typically three to five years, you have to live under a strict budget. The court will not allow you to spend money on anything non-essential.
The majority of debtors will not complete their chapter 13 repayment plans. Many who file believe they will complete their plan. Around 35 percent of people who file for Chapter 13 will complete their plan. There are some who will drop out early in the process and never submit their repayment plan to the court. By being realistic with your budget, you should be able to make the payments and complete Chapter 13.
Often the courts will have the payments deducted from your wages during your case.
Chapter 13 bankruptcies often stay on your credit file for up to ten years from the day you file. Most of the time the length averages to about seven years.
Once the case is over there are steps to take for improving your credit. There are programs established from chapter 13 bankruptcy courts. By paying off around 75 percent or more of your debts then you can attend money management seminars and apply for credit from certain local creditors.
By Emily Thomas