Chapter 13 bankruptcy is generally filed by debtors who have a valuable asset like a home or other property that is not covered by exemptions. If they file for Chapter 7 bankruptcy they are in danger of losing the property. Hence a Chapter 13 bankruptcy is preferred.
Unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy does not discharge all debts immediately. Instead the debtor proposes to pay the creditors over a period of three to five years according to a planned payment schedule. The debtor needs to plan monthly payments to clear his debts.
Since Chapter 13 bankruptcy requires scheduled payments to the creditors, it is generally appropriate only for those debtors who have a regular source of income. Freelancers or job workers are not considered good prospects for a Chapter 13 bankruptcy.
There are certain circumstances under which an individual is not considered eligible for a Chapter 13 bankruptcy. They are as follows.
As with filing any kind of bankruptcy is it vital to know what you are doing. An individual contemplating filing a Chapter 13 bankruptcy must hire an attorney to help him or her out.
The first step is to file a petition with the bankruptcy court where the debtor is residing. The court then appoints an impartial trustee for the case. The trustee serves as the liaison between the debtors and the creditors. He collects payments from the former and distributes them to the latter.
The debtor then needs to file a plan of repayment with the court within 15 days of filing the petition. Some people file the plan with the petition itself. A meeting of creditors is held no more than 20-50 days after the petition is filed during which the repayment plan is finalized.
The bankruptcy judge then determines at a confirmation meeting is the plan is valid and acceptable or not. Once the plan has been accepted it is the debtors prerogative to ensure than the plan succeeds.
If not, the debtor may find himself or herself preparing to file a Chapter 7 bankruptcy after all.
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