Chapter 13 Bankruptcy and Its Advantages
Also known as a wage-earner’s plan, Chapter 13 bankruptcy allows debtors with reliable or steady incomes to draft a plan on how he or she can and will make installment payments that will settle all or a portion of his or her debts to creditors over a period of three to five years.
This specific chapter of the bankruptcy law is a personal debt-adjustment type of bankruptcy that is supervised and protected by the U.S. Bankruptcy Court, where it is filed. Those with unincorporated business firms or individuals who are self-employed may be able to file for Chapter 13 bankruptcy.
One of the most important features of this bankruptcy law is it allows you to retain all of your assets and lets you operate your business continuously while the repayment plan that you have drafted is in effect. Another advantage it has over chapter 7 bankruptcy is its more extensive coverage on what debts can be discharged. Aside from the list of dischargeable debts in Chapter 7, which includes credit card debts, debts due to businesses and medical bills and personal loans, Chapter 13 also includes debts due to separation proceedings and property settlements (in divorce cases), debts acquired through non-dischargeable tax requirements and debts arising from willful, malicious damage to property.
The debtor’s monthly income is one of the major factors considered when determining the length of time for the repayment to creditors. Whether the time frame chosen is three or five years, creditors must realize that no effort to collect debt payment must be made against the debtor.
The greatest advantage of Chapter 13 is that you never lose any of the property or assets you have worked hard for to attain. Other advantages include an end to threats of foreclosures through settling of late payments over a number of years and rescheduling of payment for secured debts.
Chapter 13 bankruptcy may be likened to consolidation loan, the payment for which is made to the Chapter 13 appointed trustee; this means that the debtor will have no direct contact or communication with lenders and creditors so long as the law’s protection is in effect.