Bankruptcy takes place when an individual or an establishment legally discloses their unfitness to settle the payments of the creditors. There are particular laws and regulations concerning bankruptcy, and they are aimed at providing a form of protection to both the creditors and the debtors. Bankruptcy Chapter 13 is a chapter which is taken in the United States Bankruptcy code which can be chosen by individual filing for bankruptcy.
The Bankruptcy Code of the United States is held under Title 11 of the United States code. In this Bankruptcy code, there are certain chapters which make distinct forms and positions of bankruptcy. Bankruptcy Chapter 13 is also one alternative available to a bankrupt person. Debtors may choose to file the bankruptcy under Chapter 7 which would result in liquidation or straight bankruptcy, Chapter 12 (reorganization which is similar to Chapter 13 but offers additional benefits for farmers and fishermen), Chapter 11 and Chapter 13 which is the reorganization of the business. Furthermore, in many instances the debtor can even shift to another detailed chapter from Chapter 7 or 11 when confronted with involuntary bankruptcy.
Bankruptcy Chapter 13 allows an individual to undergo financial reconstituting under the supervision of the federal bankruptcy court. However, not every individual can file bankruptcy Chapter 13 since there are special requirements that have to be met. In order for a debtor to successfully file bankruptcy Chapter 13, he/she must have a disposable income to initiate a payment plan to settle the creditors. Furthermore, the Bankruptcy Code has designated debt limits for an individual to be entitled to file Chapter 13, amounting to no more than $336,900.00 in unsecured debts and $1,010,650.00 in secured debts.
On bankruptcy Chapter 13, an individual offers a 3 to 5 year plan to resolve the creditors and the refunds should begin within thirty to forty five days after the initial bankruptcy case has been filed. In addition, during this time period, the creditors are allowed to accumulate their previous debts only through the bankruptcy code. Usually, the creditor will be allowed to retain his property and the creditors will be settled an amount less than the actual owed debt.
However, there are certain disadvantages of bankruptcy Chapter 13 for instance; the filing for bankruptcy will stay in the individuals credit report for up to ten years and he/she cannot acquire any more credit without the approval of the bankruptcy code. In addition, creditors may not be prompted to provide credit to an individual in this position.
Therefore, bankruptcy Chapter 13 provides security to debtors while providing creditors a way to recover their money. Overall, it can be seen as a pretty good alternative particularly for debtor.