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What is chapter 13 bankruptcy?
What is chapter 13 bankruptcy?

Bankruptcy Lawyer

Bankruptcy is the legal status of a debtor being unable to repay their debts. Bankruptcy after filing is typically processed and ordered by a court. Bankruptcy is governed by Title 11 of the United States legal code. Title 11 is known as the Bankruptcy code due to be the total compilation of all federal statutes regarding the various bankruptcy process’.

Typically, when filing for bankruptcy the debtor will opt for chapter 7 bankruptcy. Chapter 7 details the process of liquidating assets to pay off debts whereas Chapter 13 gives a debtor an opportunity to restructure their financial affairs to maintain their business and not foreclose. By demonstrating a consistent source of income Chapter 13 allows a debtor to remain solvent by assuring the court that there is a method they can employ to repay their various creditors. Under Chapter 13, the court has the power to approve the plan without consulting or gaining the approval of the creditors so long as it meets chapter 13 guidelines. All this and more can be explained to you in-depth by bankruptcy lawyers Arlington, TX residents trust.

Chapter 13 is distinct from Chapter 7 in that it consolidates debt rather than immediate addressing it with liquidated assets. Chapter 13 restructuring usually takes between 3-5 years and may not exceed 5. The restructuring of debt allows for unsecured loans and credit to be consolidated into one loan while paying of the many creditors. This is useful in dealing with arrearages on a mortgage or paying taxes.  Because of this courts have in recent years allowed Chapter 13 to be used to as a means of mortgage modification application.

By filing for bankruptcy, under the Fair Credit Reporting Act a record of a debtor’s bankruptcy will stay on record for up to 10 years. Furthermore, you will be unable to obtain a credit card for 1-2 years or a mortgage for the same length of time.  The advantages of Chapter 13 over Chapter 7 are due to the fact that your property cannot be foreclosed on. Because the discharge of debts comes from the restructuring of those debts and not the liquidation of assets Chapter 13 allows you to keep those assets rather than lose them during the duration of Chapter 13 Bankruptcy. However, the foreclosure would still go through at the end of the bankruptcy. Chapter 13 bankruptcy also allows debtors to achieve what is essentially a super-discharge of debts, by consolidating the debts for example with one loan a debtor wipes out all their other debts and drastically lowers the number of creditors they owe to.



Thank you to our friends and contributors at Brandy Austin Law Firm, PLLC for their insight into chapter 13 bankruptcy.

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