Advantages of Chapter 13 Bankruptcy
Chapter 13 offers people a number of perks over liquidation under chapter 7. Potentially most drastically, chapter 13 provides people an option to spare their homes from foreclosure. By filing under this chapter, people can stop foreclosure actions and may cure behind home loan payments over time.
Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time.
Another advantage of chapter 13 is that it enables individuals to reschedule secured consumer debts (other than a mortgage for their primary residence) and prolong them over the life of the chapter 13 plan. Doing this may likely lower the payments.
Chapter 13 also has a very special provision that protects third parties who are bound with the debtor on “consumer debts.” This provision may defend co-signers.
Finally, chapter 13 acts like a consolidation loan under which the debtor makes the plan payments to a chapter 13 trustee who then passes out payments to lenders. Individuals will have no direct contact with creditors while in chapter 13 protection.
Chapter 13 Qualifications
Any individual, even if self-employed or engaged in an unincorporated company, is eligible for chapter 13 relief as long as the individual’s unsecured financial debts are less than $360,475 and secured obligations are less than $1,081,400. These sums are adjusted every now and then to mirror changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor.
An individual can not file under chapter 13 or any other chapter if, during the preceding 180 days, a previous bankruptcy petition was dismissed due to the individuals willful failure to appear before the court or comply with orders of the court or was freely dismissed after creditors sought relief from the bankruptcy court to take back property where they hold security on properties.
In addition, no consumer may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, acquired credit counseling from a recognized credit counseling group either in a personal or group briefing.
There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has established that there are insufficient approved agencies to provide the essential counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.