Considering Bankruptcy? Consider Chapter 13
The U.S. Bankruptcy Code is divided into chapters. Individual filers (non-businesses) generally file under either Chapter 7 or Chapter 13 of the Bankruptcy Code.

January 29, 2012 /24-7PressRelease/ -- Considering Bankruptcy? Consider Chapter 13

The U.S. Bankruptcy Code is divided into chapters. Individual filers (non-businesses) generally file under either Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 bankruptcy is a straight liquidation or fresh start where you turn over to the Court all of your non-exempt assets; all of your dischargeable debt; and pay no one except those you choose to pay.

There is no specific asset that is non-exempt -- one simply determines the value of your assets by category and subtracts any debt owed on the asset, and the difference is your equity. Any available exemption is then applied to protect that asset. If an asset is surrendered to the trustee and is sold, the debtor can claim any exemption available and receive cash from the trustee after the sale.

The assets of the filer are used to pay off creditors according to the bankruptcy plan. Leftover debt is always discharged, meaning the filer gets a fresh financial start. The debtor also has the opportunity to re-affirm secured debt and keep the collateral, provided the debt is current or can be brought current.

However, Chapter 7 requires the filer to be under the median level of income for a family of his or her size as determined by Census Bureau for the debtor's state or pass the means test based on allowed exemptions before the court will approve the bankruptcy.

Chapter 13, on the other hand, is a full or partial repayment plan which allows the filer to keep assets by paying delinquent payments through the Chapter 13 Plan. To qualify for a Chapter 13 you cannot exceed $360,475 in unsecured debt and less than $1,081,400 in secured debt. Secured debt is any debt where the creditor has an interest in the debtor's asset, meaning the creditor can recover the item if the debt is not repaid.

In Chapter 13 bankruptcy, the filer pays a monthly payment called the Plan Payment to a Chapter 13 trustee. The trustee then distributes that payment to creditors on a pro-rata basis based on the creditors' status, which will be secured, priority or general unsecured.

The plan can reduce the interest rate on short-term loans (less than five years). Mortgage debt is long term and is divided between pre-petition arrears which is paid through the plan and post-petition payments, which are paid directly to the mortgage holder outside the plan. Chapter 13 does allow unsecured creditors to be paid less than the actual amount owed based on assets and income with no additional interest or late charges, and the debts will be discharged upon completion of the plan. Chapter 13 bankruptcy will also have a less negative effect on the filer's credit score than would a foreclosure.

The Chapter 13 code section now provides the filer the opportunity to strip the lien of a second-mortgage holder where the value of the home is less than the amount owed on the first mortgage, thus making the second mortgage an unsecured debt payable at the same rate as other general unsecured creditors.

In sum, you may wish to consider Chapter 13 bankruptcy if:
-You want a reliable way to save your home
-You have steady income
-You do not qualify for Chapter 7 bankruptcy
-You want to reduce the impact on your credit score
-You wish to stop creditors from contacting you

Chapter 13 bankruptcy can provide ease of mind for the filer and give an individual a fresh financial start. If you are considering bankruptcy, speak to a knowledgeable bankruptcy attorney who can explain your options and help you determine the proper course to get back on your feet.

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