Chapter 13 Bankruptcy

Unlucky 13 is actually one of the better options when it comes to bankruptcy. With an organized repayment plan and option to hang on to assets this type of bankruptcy, though serious, is much less detrimental than others.

Like Chapter 11 bankruptcy, Chapter 13 is a reorganization bankruptcy. With this type of bankruptcy a trustee is appointed to ensure that the debtor repays his lender from future earnings. Usually the lender, the court and the person in debt will decide on a payment plan that can last anywhere from three to five years.

Chapter 13 is one of the more attractive forms of bankruptcy because it allows the person in debt to keep their assets, like a house or property, instead of having to liquidate them as is necessary with Chapter 7 bankruptcy.

The stipulation with this form of bankruptcy is that it’s really only an option for individuals who have a regular income. In order to file for Chapter 13 bankruptcy the debtor must have enough income each month to pay living expenses and make payments on their debt.

Chapter 13 bankruptcy most often comes into play when a homeowner has fallen behind on their mortgage payments, but is looking for a way to pay back his lender without getting his house taken away. Chapter 13 can temporarily halt foreclosure in this situation because the bankruptcy court will order an “automatic stay,” which prevents creditors from collecting for a period of time. The person in debt can use this time to catch up on payments. If the person in debt is unable to catch up on missed payments during this time he will be subject to inevitable foreclosure.

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