Chapter 13 bankruptcy is an option for individuals who can no longer pay bills on the original terms. This type of bankruptcy allows an individual to make one monthly payment to an attorney or bankruptcy trustee. The person is allowed to keep certain items like cars, houses and other things that they intend to pay for. A person who wants to file Chapter 13 must prove they have a job and means to pay back the creditors.
Creditors that have secured loans with the debtor can take back or possess property that was used to secure a loan. An attorney can help fight these actions. It is always a good idea to contact an attorney before choosing bankruptcy. There are certain guidelines that must be met before somebody can file a petition for bankruptcy protection.
The protection of Chapter 13 bankruptcy offers consumers an option to make good on their promises to pay for items but at lower or no interest rates. Creditors have the option of accepting new terms or repossessing their property. In most cases second cars or vacation homes are not allowed to be worked into a Chapter 13 filing. The idea is to help a person get out of their financial mess and to learn to live within their means. Overextending credit by purchasing luxury items is not deemed necessary and will not normally be considered.
After a petition to file Chapter 13 bankruptcy has been filed and accepted by the bankruptcy court, creditors are legally bound to follow the guidelines of the agreement. They cannot call or send any type of collection notices to the debtor or make any kind of moves to repossess any items. It is imperative a debtor follows the repayment plan as well. In most cases wage garnishment orders are issued to ensure the bankruptcy is paid back.
Chapter 13 bankruptcy is looked on more favorably than the other option of a Chapter 7 filing. In a Chapter 13 a debtor has five years to pay back their creditors. If they have satisfied the terms of the bankruptcy petition, the bankruptcy is discharged. This means a person has satisfied their financial obligations and is free and clear to begin using credit again. However, some creditors will be hesitant to extend credit on large purchases until some good credit history has been established.