Chapter 13 Bankruptcy
Chapter 13-Wage-Earner's Plan
Chapter 13 Bankruptcy (the wage-earner's plan) is
different from Chapter 7 Bankruptcy in that you agree
to a voluntary repayment plan. You will be able to keep
your assets, pay your creditors and discharge some of
your debts when you complete the plan. If both spouses
signed contracts together, both will have to file for
bankruptcy to discharge debts.
Under Chapter 13, you agree to pay approximately 25
percent of your income to the court. A court-appointed
trustee manages your money, pays your debts, and provides
advice and counsel when necessary.
Obtain the legal representation of an attorney experienced
in filing Chapter 13 petitions to assist you with your
case. Under Chapter 13, the following occurs:
- Your attorney files the petition with the Federal
court. A court-appointed trustee will review and confirm
the petition, pay the debts, and advise/counsel you,
the debtor.
- The court clerk notifies creditors and your employer
of the court action. Your employer will then send
a pre-determined percentage of your paycheck to the
court trustee, who pays creditors. Secured debts are
paid first, followed by unsecured debts.
- You cannot borrow more money without the court
trustee’s approval. The amount of money repaid to
your creditors depends on the amount owed, your salary,
and the payback time frame. Chapter 13 payment plans
can not exceed more than 36 months unless you can
show reason for extending the plan. The maximum time
allowed under an approved extension is 5 years. Administrative
costs can be expensive and include court costs, the
filing fee, the attorney's fee, and the trustee's
fees.
Advantages of Chapter 13 Bankruptcy
Filing for Chapter 13 Bankruptcy can be advantageous,
despite the expense. You won’t lose your property and
assets, you are protected by the court from wage garnishment
and harassment, and all you debts are finally discharged.
After you have completed your Chapter 13 obligations
and the repayment plan, it is possible to use credit
or obtain credit. However, if credit is obtained after
you have completed Chapter 13 from creditors named in
the petition, check your payments to make sure you are
not making payments on debts discharged by bankruptcy.
Previous creditors might attempt collection of former
debts.
If you choose to file bankruptcy, you can expect your
credit rating to suffer. A bankruptcy remains in your
credit file for 7 to 10 years. A bankruptcy may be reported
indefinitely if a credit report is supplied for a transaction
involving a loan of $150,000 or more, if you are applying
for a job at a salary of $75,000 or more, or if you
are applying for a life insurance policy of $150,000
or more.
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