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Bankruptcy, Bankruptcy Chapter 7. Bankruptcy Chapter 13

How Does Reorganization Work?

A Chapter 13 bankruptcy, is for individuals, not for businesses, but can be referred to as a reorganization bankruptcy. The trustee will design a repayment plan for all or a portion of your debts, based on a case by case financial situation. You, the debtor(s), meets with the bankruptcy attorney in a face to face meeting to discuss your options, the process, and the best approach for your financial situation. Once the petition is filed in a chapter 13 bankruptcy, foreclosure or repossession action is ordered frozen, or “stayed” by the court. Creditors listed in a bankruptcy petition may file for “relief from stay” in order to repossess the collateral and to attempt to sell it to settle the debt. The judge can grant the motion, as an example: a judge can grant a lender the right to foreclose and sell the property to settle the mortgage owed.

Am I Eligible For Chapter 13?

Though a reorganization bankruptcy may seem attractive since it allows you to keep your property, not everyone qualifies. Chapter 13 requires enough of a stable income to support the 3 to 5-year plan. Without the ability to prove you can sustain the plan, you may be rejected. Also, if you owe more than is allowed: $1,149,525 in secured debt, $383,175 in unsecured debt; you will not be able to file for Chapter 13 bankruptcy protection

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Do Secured Claims Need Repaid?

Secured claims, those with a lien against the property, such as a car, house, some electronics; must be usually paid in full. Property taxes, must be brought current during the repayment period, including interest charged. Payments for a car can be affected by other factors. If you would be paying off your car during the repayment period, and the car is worth less than the balance owed, you may only be required to pay up to the market value for the car and any interest owed on the loan. There are other factors, and your attorney can review this in more detail.
Unsecured priority claims, such as past due tax debt, past due child support, past due spousal support, attorney’s fees and chapter 13 Trustee’s fees are usually required to be paid in full through the Chapter 13 repayment plan. General unsecured claims are claims by creditors for debts not secured or classified as priority by US Bankruptcy Code. General unsecured claims are entitled to receive a portion of what is owed based on your disposable income and bankruptcy estate. The general rule is that those creditors must receive at least what they would have received in a Chapter 7.
Bankruptcy, Bankruptcy Chapter 7. Bankruptcy Chapter 13
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