May 10, · There is another type of bankruptcy that individuals use to reorganize their debts. This type is called Chapter 13 bankruptcy. Unlike Chapter 7, Chapter 13 does not involve karacto.xyzy, a Chapter 13 debtor (that 's what we call people who file bankruptcy) is permitted to keep all of his property, whether it is exempt or not, as long as the Chapter 13 plan complies with the law. Jun 18, · Chapter 11 and Chapter Chapter 11 and Chapter 12 are similar to Chapter 13 repayment bankruptcy but designed for specific debtors. Chapter 11 bankruptcy is another form of reorganization bankruptcy that is most often used by large businesses and corporations. Individuals can use Chapter 11 too, but it rarely makes sense for them to do so. Jun 03, · Chapter Chapter 13 bankruptcy can only be filed by individuals with a stable income. Debt limitations are also part of Chapter 13 eligibility, and the limits change regularly.
Chapter 13 is not an easy process. It requires commitment, perseverance, stability, and sacrifice. The hallmark of a Chapter 13 case is its payment plan.
The payments last from 36 to 60 months and may include an amount that will go to unsecured creditors, past-due taxes, child support, and past-due home mortgage amounts. It may even include car or house payments and some portion of a debtor's attorney fees. It is designed to. The amount of the payment is determined by the amount and types of debt owed, the debtor's income and the debtor's reasonable and necessary expenses.
You can find out more about the important events in a Chapter 13 case in Timeline of a "Typical" Chapter 13 Case. What Is Bankruptcy. Bankruptcy Basics. By Carron Armstrong. Reviewed by. Full Bio Follow Linkedin. Somer G. Anderson is an Accounting and Finance Professor with a passion for increasing the financial literacy of American consumers. She has been working in the Accounting and Finance industries for over 20 years.
Article Reviewed on May 27, Chapter 7 Discharge of debt in exchange for nonexempt nonessential property. Types of Bankruptcy Available to Individuals. There are many reasons why a debtor would choose to file Chapter 13 despite the Means Test. Help make payment of unsecured debts like medical bills and credit cards more affordable and manageable.
Provide a way to pay past-due house, car, income tax, child support and alimony payments over time. Substitute for the need to sell or turn over the nonexempt property. Updated by Carron Nicks. Continue Reading. Chapter 7. Chapter On the other hand, Chapter 13 bankruptcy will last from three to five years, the length of a monthly payment plan you propose to the court to pay certain debts.
The plan period will vary from three to five years, depending on your whether your family income is generally above or below the median income for your state of residence. The Chapter 13 plan , or simply the payment plan, is the heart of a Chapter 13 case. Chapter 13 is an attempt to "reorganize" your debt over time. It's a great tool for the debtor who is behind in house payments or car payments.
Those payments can be caught up with the payment plan over time, thereby saving the house from foreclosure or the car from repossession.
The Chapter 13 plan can also include payments to unsecured creditors like credit cards and medical bills. A calculation is applied to your income and expenses to determine if you have any disposable income after all your other obligations are met. If you have no disposable income, that's okay The debts will still be discharged because you've devoted your best effort to pay your bills through Chapter The Chapter 13 plan must meet several tests in order for it to be confirmed or approved by the bankruptcy court.
First, the plan must be proposed in good faith. This means, essentially, that you intend to completely follow through on the plan and is are attempting to misrepresent your finances or perpetrate a fraud on the court. The plan must also meet the "best interest of creditors" test. This test requires that the Chapter 13 plan must pay unsecured creditors at least what they would have had under a Chapter 7 bankruptcy.
In many cases, the unsecured creditors would have received nothing in Chapter 7, so this test can often be easily met. The other test is called the "best efforts" test. The best efforts test requires that the Chapter 13 plan pay unsecured creditors a certain amount multiplied by the debtor's disposable income.
Similar to the Chapter 7 trustee, the Chapter 13 trustee acts as the main point of contact for a debtor. The trustee will review the proposed payment plan and has the authority to challenge the plan in bankruptcy court if he or she believes that it is improper. If the Chapter 13 plan is confirmed by the bankruptcy court, the trustee acts as an intermediary between the debtor and creditors receiving payments.
Specifically, the debtor makes payments each month to the trustee. The trustee then divides up the payment, as established in the Chapter 13 plan, and issues payments to the creditors. Chapter 13 bankruptcy carries with it a few restrictions which are not present in Chapter 7 bankruptcy, the monthly plan payment being the most obvious.
In addition, you will not be allowed to incur any more debt, like a car loan, without court approval.