Understanding Filing Chapter 13 Bankruptcy

Understanding Filing Chapter 13 Bankruptcy """When you file for Chapter 13 bankruptcy, you will be required to devise a repayment plan to repay all or a portion of your obligations. This process will take between three and five years. You (or your attorney) will actually put together the payment plan and have the judge sanction it. As long as you continue to make payments in accordance with your schedule, this procedure will prevent creditors from harassing you. This method of bankruptcy can be a great relief if you are in a position where you can establish and adhere to the strict budget requirements necessary for this type of filing.

But realize that a budget that requires you to be so frugal that it causes you and your family constant anguish is a plan for failure. It is commonly said that frugality is disguised misery. In fact, a Chapter 13 repayment plan coupled with a reasonable budget has a high likelihood of success.

You must pass two tests in order to petition for Chapter 13 bankruptcy.

1. The Test of Best Interest

This measure mandates that unsecured creditors receive at least the same amount as they would have received had the debtor filed for Chapter 7 bankruptcy.

2. The Test of Best Efforts

This measure requires that you pay the bankruptcy trustee all of your disposable income for at least the first 36 months of the plan you submit. If your monthly income is greater than the state median, the IRS will allow you a certain amount for allowable expenses. The plan must span five years as opposed to three. Otherwise, the quantity of your payment will be determined by your actual, reasonable expenses.

With this variety of bankruptcy, any debts remaining after the completion of the plan are discharged.""

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