Chapter 13 Bankruptcy: Reorganization of Debt and New Bankruptcy Laws
Author: Simon Volkov
Chapter 13 bankruptcy is often referred to as 'reorganization bankruptcy'. Unlike chapter 7 bankruptcy which requires debtors to sell assets to pay outstanding debts, Chapter 13 lets petitioners keep assets as long as they adhere to a court approved repayment plan.
Chapter 13 bankruptcy extends payment terms with creditors and allows debtors to repay debts over a period of three to five years. Debtors are required to submit chapter 13 payments to a bankruptcy Trustee who distributes monthly payments to creditors.
If debtors are unable to abide by reorganized debt payments, creditors can petition the court and request the bankruptcy petition be dismissed. When debtors fail out of bankruptcy, the judge can either allow them to file Chapter 7 or dismiss the petition.
If Chapter 13 petitions are dismissed, debtors lose protection from the court and creditors can initiate collection actions, including foreclosure. This can be particularly harmful to debtors who file bankruptcy to stop foreclosure.
Once debtors fail out of bankruptcy, lenders commence with foreclosure proceedings at the point where they left off prior to the debtor filing for chapter 13. In many cases, foreclosure can commence within a matter of days.
Debtors can file for personal bankruptcy without legal assistance, but this is not advised. New bankruptcy laws established in 2005 require debtors to follow specific protocol outlined in the Bankruptcy Abuse Prevention and Consumer Protection Act. BAPCPA is exceptionally complicated and few people can adhere to the policies without assistance from bankruptcy attorneys.
When possible it is best to consult with three or more lawyers prior to filing Chapter 13. Organize financial records including pay stubs, bank statements, investment statements, alimony, child support, and expenses prior to meeting with attorneys.
Bankruptcy lawyers prepare and present petitions to the court. Shortly thereafter, a 341 creditors meeting is scheduled. Debtors are given the opportunity to explain their circumstances to creditors and present their proposed repayment plan during the 341 meeting. Creditors who want to be included in the repayment plan must submit claims within ninety days of the meeting.
BAPCPA requires all debtors to repay a portion of their debts when possible. The amount to be repaid under chapter 13 is determined by the means test; a financial tool that compares debtors income to their states' median income level.
Individuals who earn equal to or greater than median income levels are required to file chapter 13 bankruptcy. Individuals who earn less might be eligible for chapter 7.
It is important for debtors to realize a large percentage of disposable income must be contributed toward repayment of debt. Additionally, debtors cannot incur new debt during the repayment period unless approved by the bankruptcy Trustee.
Before deciding to file for chapter 13 bankruptcy it is strongly recommended to conduct research via the Internet or by consulting with a bankruptcy attorney. Bankruptcy has far-reaching effects that can haunt debtors for ten years and cause serious harm to their credit. Consider bankruptcy alternatives such as debt consolidation, debt settlement, credit counseling and budgeting before petitioning the court for debt relief.
Article Source: http://www.articlesbase.com/personal-finance-articles/chapter-13-bankruptcy-reorganization-of-debt-and-new-bankruptcy-laws-1623138.html
About the Author
Simon Volkov is a California real estate investor who specializes in buying houses from individuals facing chapter 13 bankruptcy and foreclosure. Simon is particularly interested in houses located in Orange County and southern California, Nevada, Arizona and Washington. If you are facing foreclosure or bankruptcy and need to sell your house fast, submit property information via the "we buy houses" form at www.SimonVolkov.com.
Bankruptcy I have a 120K judgement (from a foreclosed mortgage) against me, wage garnishment and credit debt.?
I have a judgment against me from the second mortgage holder on an investment house I bought that was foreclosed on. The first mortgage company foreclosed and sold the house (in Nevada) at auction. The second mortgage company didn’t get settled thru foreclosure because of some law in Nevada so they came after me and won the judgment 120K. Now they have garnished my wages and I am barely making it (Single income, three kids high rent in So. Cal) I do not have ANY assets, and do have large credit card debts and reside in California. I was asked if the judgment was non-dischargeable- it does not say non-dischargeable.
Is it my only solution to go bankrupt(not credit consultation nor counseling)
1) I’m not sure if I which chapter I should file under.
2) I do not have money for a highpriced lawyer- what are my options? (I have found flat rate attorneys and cut rate bankruptcy specialists)
3) What questions should I ask of prospective legal help before I commit to one service/attorney?
Oh, more info, the home was bought on little down with our very good credit. There was no equity in it but was in an area of high rising appreciation (three years ago). But one day the developers of the housing tract lower the prices of the newest tract accross the street. They cut the price of the new identical homes by 100,000 dollars. We found our investment home devalued by 100,000 overnight and had aprox 90k in negative equity. We were previously renting it for a 300.00 a month loss- banking on quick equity by appreciation.
Chapter 7 gives you a fresh start. However if you have alot of expensive toys or material possessions they may want to grab them. They list your material assets at fire sale value (garage sale priced) and your allowed to keep a certain amount of assets and cash. I was stressed out financially for a couple of years and when I decided to let go, things got alot better. No more chest pains, phone calls, sleepless nights……My lawyer cost 1,700…..bankruptcy for dummies is a great book, answers alot of questions. Grab an attorney that comes highly referred. Your first meeting with him/her is usually free, you can get references from attorneys that don’t handle bankruptcies so ask your friends for a name of a good lawyer, then call them and ask them to refer you to a good bankruptcy attorney. If you have alot of assets……non retirement assests (because those are protected), then you may have to file chapter 13 which would help you reorganize your debts and set up a plan to pay them back at a reduced amount and interest rate. Good luck to you…….remember you can’t take it with you, so don’t let it take you to that place.