Chapter 13 Bankruptcy Repayment Plans

In the US there are a number of plans available to an individual or a business who wishes to declare bankruptcy; the most popular for individuals are Chapters 7 and 13. Chapter 7 bankruptcy demands a complete disposal of all assets; the proceeds from the sale are used to repay in full or in part the debts that have been accumulated. Once this has been accomplished the debtor is declared free of debt and he or she can restart their lives with a clean financial slate. Chapter 13 is different, the debtor and his or her Chapter 13 bankruptcy attorneys in Chicago work a plan which is acceptable to the court for repayment of all or the greatest majority of debt over an agreed upon period of time, normally three to five years but never longer. The debtor and the attorneys prepare a repayment plan in full compliance with the guidelines established by the court, once completed the reorganization and repayment plan is presented to the court and the court appointed trustee for approval and supervision. The debtor pays money to the trustee who in turn pays the debt down in accordance with the approved plan, any debt left after the five year period is discharged.

Almost anyone can declare Chapter 7 bankruptcy, Chapter 13 is available to people who fall into two distinct categories. The first category is made up of those whose income exceeds the federal means test, a test that determines if the debtor has sufficient income and means to pay the debt off. The second category is made up of those who are rich in assets that they do not want to lose. Regardless of which category the debtor falls in the outcome is the same, he or she, along with their Chapter 13 bankruptcy attorneys in Chicago develop a repayment plan which allows the bankrupt to keep the assets while at the same time fulfilling their obligation to repay their debts in accordance with the agreed upon plan.

Although Chapter 13 bankruptcy does allow the debtor to keep his or her assets the downside is the length of time that it takes to fulfill the agreed upon obligation. For up to five years , other than money needed for living expenses and agreed by the court, the total disposable income will be applied to debt repayment. This can prove to be a burden as the debtors income is not his or hers to do with as they please, any expenditures that are not part of the plan must be given approval by the court appointed administrator. Five years is a long time, during this period circumstances can change dramatically, if they happen to take a change for the worse the debtor may have to renegotiate the terms of the original plan or worse, the plan might be dismissed all-together and the debtor will find himself or herself right back where they started.

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