When someone files for bankruptcy
under Chapter 13 of the Bankruptcy Code, their aim is to have the
opportunity to repay some or all the debts in their name, in better
terms, i.e. lower or no interest. Unlike Chapter 7 which involves
liquidation of assets, this process allows the debtor to use whatever
income they may have in the future to pay off the creditors. Needless to
say, filing Chapter 13 Bankruptcy is applicable for a debtor who does
have a regular income, and thus can afford to request for such
adjustments, or reductions.
The United States Bankruptcy Code
gives the debtor a ceiling of 5 years, within which the creditors must
be paid back. While the attorney will safeguard your interests, the
entire process is carried out under the supervision of the courts.
How Does
Chapter 13 Bankruptcy Work?
While debtors are allowed to keep
all of their property, the court approves a new interest-free plan for
repayment. A written plan is created giving details of all the
transactions that will occur, and the duration of the same. The
repayment must begin within thirty to forty-five days after the case has
started. The transitory stage of paying a trustee who then pays a
creditor, as in Chapter 7 Bankruptcy is usually eliminated with Chapter
13 Bankruptcy. Although, in some cases people may involve a trustee who
would take care of disbursing money to the creditors as per the plan.
Also, as per the law the creditors must strictly adhere the repayment
plan approved by the court and are in fact prohibited to collect any
claims from the debtor. Your attorney will prepare new repayment plan to
best suit your situation.
