A Chapter 13 Bankruptcy
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A Chapter 13 bankruptcy is a certain kind of court filing that is provided for under US Federals laws that allows a debtor to set up a repayment plan for the debts owing. Once the Chapter 13 bankruptcy forms have been filled out, the new plan for repayment can be for three years or for five years. The plan itself is crafted to accommodate the creditors according to the bankruptcy code and must be agreed to by all parties. The execution of the plan is under the authority of the bankruptcy trustee who is a third party appointed by the court.
When someone files a Chapter 13, it means that they are not able to repay their debt obligations as they originally agreed to do when the debt was taken on. Chapter 13 bankruptcy law allows for these debts to be reorganized for the purpose of repayment. This is different than a Chapter 7 one, in which the debts are discharged immediately instead of being set up with a repayment schedule.
In most cases, a Chapter 13 one has a repayment plan in which the debtor makes monthly, bimonthly or weekly payments to the trustee. The trustee then provides help by taking care of properly dispersing the payments to the creditors. In most instances, the amount of the debt has been restructured and is less than the full amount that is owed to all the creditors.
The trustee in a Chapter 13 bankruptcy is responsible for learning about the financial situation of the person who is filing for bankruptcy, to determine how much they are able to make in payments to the bankruptcy court on a regular basis. The trustee also takes into account the income level of the person, or family, and the obligations which are exempt from the bankruptcy proceedings.
Because a Chapter 13 requires that regularly scheduled payments be made to the court, it is generally recommended only for debtors who have a regular and stable income. For those who are seasonal workers or freelancers, filing Chapter 13 bankruptcy is not the best solution for their financial troubles, in most instances.
When a debtor has agreed to the terms and payment plan of a Chapter 13, it is crucial that they always make their payment to the court on time. If they fail to make their payments as agreed, the entire court record and case can be thrown out. Should this happen, the creditors once again have the right to come after the debtor for the full amount of the debt and the protections under the bankruptcy relief process would not be available to them until they are eligible to file it again.
If it occurs that a debtor, who is under a repayment plan through a Chapter 13, is not able to keep up with the payment schedule, then there is the possibility to find relief from the reorganization provisions agreed upon. In the case of a situation that arises, in which the debtor is unable to make the payments to the court as agreed, such as in the case of losing a job or other source of income or if they have an extended illness, they might be able to file a bankruptcy claim form known as a "hardship discharge."
The first thing that must be looked at before seeking a "hardship discharge" of a Chapter 13 bankruptcy plan, is to evaluate the bankruptcy to see if it can be modified to a Chapter 7. If it can be modified from Chapter 13 to Chapter 7, then the "hardship discharge" would not be allowed. The case and complete situation should be reviewed by an experienced bankruptcy lawyer in order to know what options are available to the debtor. In all cases, because of the additional stress and expense of returning to the court, to once again fill out the Chapter 13 bankruptcy forms and get approval, every attempt should be made to make all payments as agreed to under the repayment plan.
So that's all I have for you on this subject. I hope you found this information useful.
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