Personal bankruptcy is one of the quickest solutions to your debt problem. It is when you declare yourself bankrupt. You can file a personal bankruptcy case in the court and solve your debt problems. As this solution seems easy, there are a few consequences too, but you can avoid some of these consequences.
You will find that there are various types of bankruptcy programs that are legal. The government has rules and regulations for filing these personal bankruptcy programs. This article discusses chapter 13 bankruptcy.
So what is chapter 13 bankruptcy? It is for those individuals or married couples who are capable of paying their debt if they are given more time. The time limit is no more than five years. The debtors will create a plan according to the law and their legal documents, and they will have to pay the debt from three to five years. To qualify for chapter 13, the individuals must have a regular source of income. It is one of the easiest ways to consolidate debt.
How Does Chapter 13 Work?
Besides having a regular income source, the individual must not have unsecured debts that total more than $383,175. These unsecured debts include personal loans and credit card bills. Furthermore, the individuals should not have secured debts that total more than $1,149,525. These secured debts include car loans and mortgages. These figures are not absolute and change periodically. The individual who is applying for chapter 13 bankruptcy should take proper credit counseling from an approved agency. He must receive counseling in the 180 days following the bankruptcy lawsuit.
The process starts when the debtor files a petition (application via legal procedure) in the local bankruptcy court. He lists all his income and expenses, assets and debts, any existing leases or contracts in his name, tax returns, and the statement of financial affairs. All this information is necessary for filing the case.
After filing the case, the debtor will make a repayment plan and present it to the court. The judge will then hold a hearing and issue orders once he determines whether the program meets the requirements. During the hearing, the creditors are also allowed to make objections.
The benefit of chapter 13 bankruptcy is that it will save the individual’s home. If there is any foreclosure going on, chapter 13 will suspend it. This type of personal bankruptcy does not mean it will eliminate the debt but only give you a chance to repay it.
The debtors and creditors can come to an agreement about the number of payments and amount per payment.
The Consequences of Not Making Repayment
The matter will be brought back to the court if the debtor is not able to make the repayment on time. If this happens, the debtor will have to sell his property to make the payment.
It surely is a great tool to avoid any financial mishap, but only if you make the repayment on time.