Chapter 13 is one of the methods that individuals can use to file for bankruptcy. This bankruptcy filing offers individuals a way to financially reorganize themselves under the supervision of a federal bankruptcy court. Chapter 13 is mostly used by individuals with a regular source of income to rehabilitate themselves by fulfilling the plan approved by the federal bankruptcy court. This differs from a Chapter 7 bankruptcy filing in that Chapter 7 offers immediate and complete relief from several debts.
The type of bankruptcy filing is determined by a number of factors, the most important ones being the individuals$%: disposable income and the type of relief sought. In some cases, if it is determined that the individual just does not have the necessary disposable income to fund a viable Chapter 13 bankruptcy claim, then it is simply not possible for the individual to file for Chapter 13.
Chapter 13 provides the debtor with a plan that allows him to pay off her creditors over a period of 3 to 5 years. During this period, the creditors are not allowed to collect anything on the debt, except through the bankruptcy court.
When filing for Chapter 13, the individual filing for bankruptcy gets to keep his property and assets and the creditors end up with less money than they$%:re owed $%: but get paid more than they would if the person defaulted on the debts.
Chapter 13 has its advantages as well as disadvantages.
The major advantages include the stopping of all foreclosures and having an 'accelerated' mortgage being reinstated when the bankruptcy plan is fulfilled. Certain debts that are not dischargeable under Chapter 7 can be discharged under Chapter 13. Collection activities against non-filing co-debtors can also be completely stopped for the life of the case.
One of the major disadvantages of filing for Chapter 13 is that the record stays in the individual$%:s credit report for 10 years. During the life of the case, the debtor has to obtain the Chapter 13 Trustee$%:s permission in order to apply for any additional credit. These factors tend to discourage most creditors from lending money to such individuals.
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