We all know that Chapter 13 Bankruptcy is an option available to all Americans to reorganize their finances. The requisites are that their unsecured debts that they owe are less than $307,675 and secured debts are not less than $922,975. One of the changes that they made to this law is that individuals are required to undergo credit counselling from an affiliated credit counselling agency within 180 days prior to filing.

(US Bankruptcy Law USC 109,111)

Inability to work due to health issues or a prolonged period of unemployment is only a few of the reasons why people are forced to file for bankruptcy. Divorce or the death of their spouse may also lead to bankruptcy.

The Chapter 13 Bankruptcy is often resorted to by people facing foreclosure charges. This is because that law enjoins banks to foreclose your property with the requirement that you have to continue paying your mortgage if you wish to retain your property.

Chapter 13 Bankruptcy is also known as the Wage Earner’s Plan. It allows individuals to repay their debts over a 3-5 year period, while being able to retain their assets. This is followed by a reschedule of your secured debts to be able to extend and lower your payments. A trustee is then assigned to manage and distribute your payments. This will make creditors more flexible, for they are assured that they will be repaid.

Those who want to file for bankruptcy may choose to file on their own or hire a bankruptcy attorney. If they cannot afford one, they are entitled by law to pro bono legal assistance through the American Bar Association.

You have to first file a petition in the bankruptcy court in the judicial district where you reside. This petition consists of a lost of your assets and liabilities, proof of credit counselling, current income and expenses, and your proposed repayment plan. 3-6 weeks following, a meeting with the creditors will be scheduled. This is where the creditors are allowed to ask debtors questions so they can accept or reject the proposed repayment plan. A hearing will then ensue if the creditors correctly filed their claims with the court 90 days after their meeting. The judge may choose to accept, reject or modify the repayment plan. And the approved plan must be faithfully followed by the debtor making regular payments to the trustee until all the reorganized debts have been paid in full.

Chapter 13 Bankruptcy may be a tedious, lengthy and meticulous process but it is very useful in helping the debtor get back on his feet. It is very important that they adhere to a repayment plan that they can keep because this law is very expensive to pursue. Before making your final decision, it is always best to know what you’re entering. Consult an attorney or research it yourself via the internet.