What Does It Mean?
When a person files for Chapter 13 bankruptcy, his primary objective is to obtain the opportunity to repay some or all of his debt at reduced or negative interest rates. In contrast to Chapter 7 bankruptcy, which involves the liquidation of assets, Chapter 13 bankruptcy involves the reorganization of debts, allowing debtors to use future income to repay creditors. Thus, Chapter 13 bankruptcy is appropriate for debtors who have a steady source of income and can afford to repay their debts according to the repayment plan. The debtors have five years to repay their creditors, as stipulated by the code. Although a lawyer will protect your interests under this bankruptcy code, the entire procedure is administered by the courts.
How It Operates?
Even though the debtors are permitted to retain all of their assets, the court approves a new repayment plan with no interest. In addition, a written plan is created that outlines the specifics of each transaction and its duration. The repayment process must commence within 30 to 45 days of the case's initiation. In Chapter 13 Bankruptcy, the transitory phase in which you pay a trustee, who then pays your creditors, as seen in Chapter 7 Bankruptcy, is generally exempt.
In certain instances, however, individuals may seek the assistance of a trustee to carry out the process of distributing the funds to all creditors in accordance with the plan. Moreover, according to the law, creditors must strictly adhere to the court-approved repayment plan and are prohibited from collecting any claims from debtors. Here, the attorney must devise a new repayment plan that fits your circumstances optimally.
One of the greatest advantages of Chapter 13 over Chapter 7 is the option to receive a complete discharge, which is not available under Chapter 7 Bankruptcy. For instance, if a debtor makes all the required payments outlined in the plan, he or she is eligible for a full plan discharge. There may be a few exemptions in this case, and your attorney can advise you on those.
A further advantage of is that you can design a repayment plan even if your creditor disapproves of it, though court approval is required. In order to facilitate fair proceedings, the court allows creditors to register objections if they have one.
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