Chapter 13 Bankruptcy - Need to Knows and Basics

With the large number of bankruptcies being performed it is important to know the basic facts about the kinds of bankruptcies out there. Whether you are about to go through the process or just know someone who is, it is important to stay informed in such pivotal matters.
A chapter 13 bankruptcy, also known as a debt repayment or wage earners bankruptcy, requires that you put together a plan to repay all or portions of the debt you owe in the form of installments that are taken from your income. Under these bankruptcy laws you are allowed to keep your property and possessions and promise to pay back debts over a period of time usually ranging from 3-5 years. Below are some more detailed answers to common questions:
How Do I Know If I Am Eligible for A Chapter 13 Bankruptcy?
The biggest eligibility requirement is simply to have a regular and steady income. Furthermore the income must exceed what the court determines to be 'reasonable' living expenses and must be financially able to perform a repayment. If you are living off of your credit cards you may need to make some serious life changes in order for this to happen. A second requirement is that you must be below a certain threshold of secured and unsecured debt, a number which your lawyer can provide you more accurately.
What are the Benefits of Chapter 13?
In my opinion, the biggest benefit of such a program is that is teaches financial responsibility. Through repayment many learn the lesson of financial ignorance through required programs such as credit counseling and the formation of a formal budget. Many view the largest benefit as the permission of the court to keep your possessions as opposed to starting from scratch, and in some cases, with nothing other than the clothes on their back. This makes Chapter 13 greatly appealing to those who have debts in the form of homes and cars.
Are There Any Disadvantages?
Obviously the largest disadvantage is the fact that the bankruptcy can stay on your credit report for up to ten years. During this time the debtor is not permitted to incur additional debt or obtain more credit without permission from the bankruptcy court. Furthermore creditors are mush less likely to extend any form of credit to a person that they consider to be of such high risk.
While any form of bankruptcy is extremely hurtful they are sometimes necessary, and a Chapter 13 offers some desirable traits. During times of temporary financial trouble is when most choose this form, and because the debtor is permitted to keep his/her belongings a complete feeling of loss can be avoided. As always, professional advice is key and can prevent further headaches, so if you are thinking about filing bankruptcy talk to a professional credit counselor or lawyer to determine the best fit for you.

Visit www.kanzerlaw.com for more details and guidance on bankruptcy information.

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Article independently authored by Matthew Eddington. The content herein may or may not reflect the views and opinions of Michael F. Kanzer Law & Associates