Chapter 13 Bankruptcy Information

Filing bankruptcy is advisable when a debtor is unable to settle the claims of the creditors. It's important to note that filing bankruptcy prohibits the creditors from suing the debtor and obtaining a writ permitting wage garnishment. However, any garnishments in lieu of student loans and unpaid taxes will hold regardless of a person having filed bankruptcy. Again, obligations like child support and alimony cannot be requited. The following Chapter 13 bankruptcy information may be of use to a person who is left with no better alternative.

Information Regarding Eligibility and Repayment
Filing Chapter 13 results in the petitioner having to discharge debts over a period of 3 to 5 years in accordance with a repayment plan that is worked out by the trustee, after the debtor is questioned in the presence of creditors about his/her financial affairs. The debtor is expected to have sought credit counseling within 180 days prior to filing bankruptcy. Petitioners also need to be current on their Federal and State income tax returns.

The proposed repayment plan is worked out after taking into account the income, the expenditure, and the debts of the petitioner. The total amount of unsecured and secured debts cannot exceed $336,900 and $1,010,650 respectively. This plan has to be presented in front of the trustee and the creditors. The bankruptcy court approves or disapproves the plan within 45 days of this meeting. It would behoove the readers to note that the debtor needs to start making payments to the creditors within 30 days of filing bankruptcy irrespective of whether the court has approved the repayment plan.

Since Chapter 13 is a wage earner's plan, the petitioner is expected to have a steady source of income. People may use their spouse's income regardless of whether they are filing individually or jointly. Typically, petitioners use their salary to pay the creditors. Petitioners are also entitled to use their social security benefits, pension, unemployment compensation, alimony and child support to make the requisite payments.

Claims that can be classified as priority, secured, and unsecured have to be discharged within a period of 5 years. Secured and priority debts are settled in full but as far as unsecured debts are concerned the creditor may not recover more than 50 percent of the dues.

Information Regarding Consequences
Filing bankruptcy affects a person's credit score and may lower it by as much as 400 points. Filing under Chapter 13 stays on record for at least 7 years. People also find it distinctly difficult to obtain a mortgage loan after bankruptcy. In fact, Federal Housing Administration (FHA) insured loans, and Veterans Administration (VA) insured loans may be their best bet. The latter is available to eligible veterans after 2 years of filing Chapter 13 while the former is made available provided the petitioner makes 12 consecutive payments on all accounts from the date of filing bankruptcy.

It is evident that declaring bankruptcy has a number of negative consequences. Still, Chapter 13 bankruptcy indicates the ability of a person to adhere to a repayment schedule, and hence is a better alternative than Chapter 7. The latter absolves one of the responsibility of repaying debts but the repercussions are worse. It is advisable to consult a lawyer for any additional Chapter 13 bankruptcy information.