Chapter 13 Bankruptcy
Remember how the killer in the Friday the 13th
sequels never seems to go away? Unlike
Chapter 7, Chapter 13 bankruptcy is a time consuming process.
Key elements of Chapter 13 bankruptcy include the following:
- Long
duration, usually occurring over 3 to 5 years.
- Unsecured
debt up to the amount of non-exempt property owned by the debtor
must be paid back. Translated:
Once you have reached your exemption limit for your state, you will
likely have to sell or surrender all remaining property and give the
proceeds to your unsecured creditors.
- Secured
debt must be paid back by returning collateral or by making timely
payments, including interest, over the course of the bankruptcy.
Translated: You have to keep making your house payments and/or car
payments throughout the 3- to 5-year bankruptcy period or you will
have to foreclose or sell.
- Total
amount of secured debt cannot exceed $350,000, and total amount of
unsecured debt cannot exceed $100,000.
- Debtor
must have a steady source of income over the duration of the
bankruptcy.
Chapter 13 is probably the best bankruptcy option
for anyone meeting the following profiles:
- You
have substantial secured debt (for example, a home) that you want to retain
and this debt cannot be discharged in a Chapter 7 bankruptcy due to
limited state exemptions.
- You
have a friend or relative that co-signed a loan for which they would
be responsible under a Chapter 7 bankruptcy.
- You
have an IRS obligation or student loan that could only be discharged
under a Chapter 13 bankruptcy.
 This profile of Chapter 13 bankruptcy is based on
current laws. Once
President Bush signs the proposed bankruptcy reform bill into law,
Chapter 13 bankruptcy will become much more unpleasant.
For more information regarding personal bankruptcy, click on the
link below.
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