Chapter 13 bankruptcy is a debt repayment plan for individuals. It protects your house from foreclosure while allowing you to catch up on over-due mortgage payments. It can also be a viable option for those who may not qualify for Chapter 7.
Chapter 13 is different than Chapter 7, (which may allow you to completely eliminate your consumer debts). Chapter 13 may better suit people who do not qualify for Chapter 7 under the new rules, or who wish to preserve their credit rating by restructuring their debts. Filing a case reorganizes that debt into a single monthly payment. And that payment is then stretched out over 36 to 60 months.
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Some qualifications: Chapter 13 is formulated for people who have a regular source of income, and a desire to pay his or her debts, but are currently unable to do so. A court supervises the adjustment procedure. And all unsecured debts must total less than $269,250. All secured debts must total less than $807,750.
All plans which must be approved by the court and provide payment details. Assuming those plans are approved, fixed payment amounts are then sent to the trustee on a regular basis (typically biweekly or monthly). And the trustee distributes those funds to the creditors according to the terms of the plan (often for less than the full payment on their claims). Planning with a certified tax attorney or accountant is advised.
To file for bankruptcy, the debtor files a bankruptcy petition (which is closely related to the Chapter 7 petition), including a thorough financial statement and a complete list of assets and liabilities.
Remember that Chapter 13 just one of several options for people who are trying to save their homes from foreclosure. If you are worried about losing your home in foreclosure or of having your car repossessed, Chapter 13 is an option that can help.
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