Is Filing Chapter 13 Bankruptcy A Viable Option

Chapter 13 bankruptcy involves a thorough analysis of your income, monthly expenses and total debts. It is often referred to as the ‘wage earners plan’. The process of the chapter 13 bankruptcy is intricate. After filing a case, a debtor will send in a proposition of repayment plan for obligations and debts, if any. Bankruptcy court will review the proposal and if it gets approved, a trustee will be appointed who will take over the total assets of the debtor and distribute them among the creditors. The trustee will be responsible for controlling the debtor’s financial needs during the repayment phase. The debtor needs to get all the credit-related issues reviewed and approved from the trustee. The repayment phase is usually a period of 3-5 years, during which the debtor’s expenses will be strict and court-imposed. He would not be allowed to make any non-essential expenses during this period.

There is no tool like a Chapter 13 bankruptcy. What other tool can get you protection from foreclosure, credit card debt help, and relief from your creditors and more? To be eligible for those benefits, though, you must not break the rules. Making your plan payments is not a rule you want to break.

If you previously filed a Chapter 13 bankruptcy (also known as a “wage earner repayment plan”), you may file a new Chapter 13 bankruptcy after as little as two years after the original petition was filed. In Chapter 13 bankruptcy, the bankruptcy court judge creates a repayment plan on behalf of the debtor for a period, usually three to five years.

Thus, the means test is “a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. (These filers may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 to wipe out their debts altogether.)” Many think the bankruptcy means test is complex but generous and most debtors seem to have no trouble meeting its requirements, while others[who?] have suggested that the means test is not all that fair or equitable, and have somewhat cynically pointed out that the reference to consumer protection in the bankruptcy act is ironic at best, since those with primarily consumer debt are required to pass a means test while businesses are not. What is undeniable is that it is complex, and the terms that govern many parts of it – including those terms that control whether it applies at all – are of unsettled definition.[7]

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Chapter 13 bankruptcy offers people who have a consistent and stable income an opportunity to reorganize their debt and generally get out of debt faster.

In addition to the above listed requirements, there are restrictions on applying for bankruptcy. If you have previously filed for Chapter 13 bankruptcy, lawyers will tell you that you will have to wait 2 years before filing again under this category. If your previous bankruptcy filing was under Chapter 7 (or any type but Chapter 13), the wait is increased to 4 years.

If you previously filed a Chapter 13 bankruptcy, you must wait six years before filing a Chapter 7 bankruptcy. This generally applies only where more than seventy percent of the plan is completed. If less than seventy percent is completed, it may be better to consider a petition converting the existing Chapter 13 repayment plan into a Chapter 7 discharge.

Chapter 13 bankruptcy is often referred to as ‘reorganization
bankruptcy’ because debtors are required to develop a creditor repayment plan. This
debt relief option allows debtors to retain assets, such as homes and
automobiles, as long as they comply with repayment terms.