What Is Chapter 13 Bankruptcy?

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What Is Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy allows a person to restructure their budget so they can begin paying off some of their debts to creditors. This is also called "reorganization bankruptcy" or "restructuring bankruptcy." With a Chapter 13 filing, the debtor can pay a percentage of some of their debts. Some debts may be discharged, while other debts must be paid off in full. This all depends on a variety of conditions and factors like:

Chapter 13 filings are often offered as an option when Chapter 7 Bankruptcy is not available. Chapter 7 involves a discharge of most of the person’s debt. However, chapter 7 is only issued in cases where the person clearly can’t pay back the creditor.

What Are Some Other Aspects of Chapter 13 Bankruptcy?

When filing for Chapter 13 Bankruptcy, you should be aware of some other aspects of the filing. These can often be beneficial for the debtor. For instance, filing under chapter 13 creates an "automatic stay" on any debt collection efforts. This means that your creditors can’t collect debts from you while the Chapter 13 process is being completed. This also temporarily suspends foreclosure proceedings as well.

Also, reorganization bankruptcy often involves the person being under a strict financial budget for several years. The person usually can’t spend money on unnecessary expenses. While this can be limiting, it usually works out for the benefit of the debtor in the long run.

Lastly, creditor payments can sometimes be garnished from your wages. This means that they will be automatically taken out of your paycheck and issued to the court for processing. Wage garnishment can also be limiting on a person’s finances. But, if the person is "on board" with the process, they will see that it helps to reduce much of the debt over time.

What Is a Forced Conversion Hearing?

Forced conversion is where the court requires a person to change their bankruptcy case from Chapter 7 to Chapter 13. This applies in situations where the person has enough money to repay creditors. Forced conversion can also happen in the other way around, i.e., Chapter 13 to Chapter 7. Thus, bankruptcy hearings are often subject to the discretion of the judge.

Should I Hire a Lawyer for Help with Chapter 13 Bankruptcy?

Chapter 13 bankruptcy can be a complex process that involves many different factors. The process can also involve many different parties, such as creditors, mortgagors, and other parties. You may wish to hire a lawyer if you need advice regarding bankruptcy proceedings. Your attorney can provide you with legal guidance and can inform you of your rights. Also, your lawyer can be available to represent you during the formal hearings before a judge.

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Last Modified: 05-16-2014 04:11 PM PDT

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