Chapter 13 Personal Bankruptcy
A Chapter 13 Personal Bankruptcy, or “Wage Earners Plan”, plans an organized schedule for the debtor to catch back up with his payments while still securing his valued assets. This plan is created to map out how the debtor plans to repay the creditor over a certain amount of time, and this plan is presented before a bankruptcy judge for approval. After the Bankruptcy Court’s approval, a Chapter 13 trustee is elected who is responsible to facilitate the process of gathering the debtor’s payments and allocating it amongst the creditors.
A Chapter 13 can only be filed by those who have an income, a secured debt not exceeding $1,010,650, and an unsecured debt not exceeding $336,900. If the debtor’s income is lower than the region’s median income, then the plan is typically for three years, but if the personal income is higher than the median income than that time span usually encompasses five years. US law forbids any payment plan to exceed five years.
Several advantages allow a Chapter 13 to be preferable to a Chapter 7 of liquidation. First and foremost, debtors can assuredly keep their houses from foreclosure. However, they must still make all mortgage payments in a timely fashion. Secondly, individuals can rearrange secured debts so that they can plan them out over the time span of the Chapter 13 plan, which may even reduce payments. Lastly, debtors can be protected from direct contact with creditors because of the mediator role entrusted to the Chapter 13 trustee, who is able to assist and provide guidance throughout the process.