Chapter 13 bankruptcy is one of the many Chapters of bankruptcy law that are able to be filed in a court of law. Chapter 13, however, deals with an individual more than a business conglomerate or commercial entity like so many of the other Chapters do. With Chapter 13, a person can set up a plan to repay all of their debts in due time, as long as that person is currently employed. The usual scenario has the debtor repaying the creditor for 3-5 years. After the agreed upon period has been reached, the agreed upon sum of the debt will be repaid, and the person can move on to another aspect of their lives. Also during this time, creditors are not able to carry out any collection practices against the debtor.
Whereas Chapter 7 of bankruptcy will force a person to go through and liquidate all of their personal belongings, Chapter 13 is much more flexible in terms of what you do and do not have to give up. A person is able to keep their home when they file for Chapter 13, whereas they might not be able to keep it with Chapter 7. While the agreed upon mortgage payments need to be paid in full and on time, the debtor is at least allowed to have a familiar roof over their heads while they are trying to make do with the situation they are in. Another great advantage of filing for Chapter 13 is that there is no direct interaction between the defaulted person and the credit agencies. During the Chapter 13 plan, no one representing the loan agencies that are looking for the money are able to come in contact with the defaulted.
When a person is protected under the scope of Chapter 13, they are appointed a trustee by the court to oversee all of the financial proceedings. These trustees are the people who will represent the debtor when payments are being made to the agencies. The trustee is also responsible for evaluating the ongoing case in order to make sure all relevant laws and statutes are being followed by the person in debt.
Once a Chapter 13 claim is filed, any move by agencies to foreclose on the person's home has to be stopped immediately. The claimant will then have a reasonable amount of time to repay the money that is still owed on the loan. If they are able to keep up with the court-approved payments and the banks continue to remain happy with the situation, the person can continue to live in their homes without fear of foreclosure.
Most people usually try to fulfill their plans by having the trustee garnish their wages, as this provides the easiest and most convenient way for the payments to be made. If a debtor begins to not pay on the newly agreed upon plan that was composed during the Chapter 13 proceedings, the court may order the debtor to file for Chapter 7 and have all of their assets liquidated for their current value. Chapter 13 is very beneficial to people who use it correctly and make their scheduled payments on time.
