This mandates and provides relief from creditors by negotiating a reduction in the principal and a monthly payment amount for existing debt. This also allows debtors to keep the underlying property at a more affordable payment while protecting them from further legal action from their creditors.
Chapter 13 bankruptcy is available to individuals who owe less than $250,000 in unsecured debt like credit cards or in excess of $750,000 in secured debt including mortgages or car loans. A secured debt, also known as collateralized debt, is secured with a property such as a mortgage, car loan, motorcycle loan, or boat loan. An individual who’s contracted under a Chapter 13 bankruptcy may keep the property as long as payments are made on time. An unsecured debt, on the other hand, includes items such credit cards, medical bills, and personal loans, also known as signature loans.
When you file for a Chapter 13 bankruptcy through a bankruptcy court in your district, usually with the assistance of an attorney, you’ll be required to list down all your assets and liabilities, current income and expenditures, and a statement of your current financial affairs. Under this chapter, you are allowed to claim as exempt and keep certain properties. The payment terms are renegotiated with your creditors and you will be required to make one monthly payment to a trustee who then distributes the money to your creditors. Most Chapter 13 bankruptcy plans require you to repay your debts over a three to five year period with your first payment due within 30 days after you file in court.
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