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What is Chapter 13 Bankruptcy?

In our last post, we looked at Chapter 7 Bankruptcy, or the most popular means of a short-term solution for relieving debts. Chapter 13 differs from this by allowing people to reorganize their financial situation under the supervision of a bankruptcy court.

Chapter 13 is a long-term solution that stops foreclosure through the process. The main goal of Chapter 13 is to create a plan to pay back creditors over an extended (3-5 years) period. As the plan is being constructed and reviewed, creditors cannot pursue collections — something that’s handy when you’re trying to buy time to evaluate your options.

In short, the missed payments collected on your mortgage (the payments that prompted the foreclosure and any ensuing missed payments) go into a repayment plan to the lender. Keep in mind that you must make mortgage payments during the Chapter 13 Bankruptcy plan. However, this restructuring, assuming you have the cash flow to work with it, is one of the most straightforward ways to save your home from foreclosure.

During the repayment plan, funds must be paid either directly or through payroll deductions. During this time, you also can’t incur any new debt without consulting the lender – so you might want to hold off on buying that new car, both from a legal and a practical perspective!

You are eligible for Chapter 13 Bankruptcy if your unsecured debts are under $336,900 and your secured debts are less than $1,010,650 (as of February 2010). In addition, you must have undergone credit counseling within 180 days before you file for Chapter 13 Bankruptcy (in other words, you must know what you’re doing when for the repayment plan).

Search for foreclosure homes www.bestreohomes.com

The views published here are the opinions of the writer and are not a substitute for legal counsel.


Posted: Wednesday, February 24, 2010 4:49 PM by Israel and Rachel Gonzalez

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