Filing for bankruptcy is advisable when a debtor is unable to settle claims of the creditors. It's important to note that filing for bankruptcy prohibits the creditors from suing the debtor and obtaining a writ permitting wage garnishment. However, any garnishments in lieu of student loans and unpaid taxes will hold regardless of a person having filed for bankruptcy. Again, obligations like child support and alimony cannot be requited. The following information on Chapter 13 bankruptcy may be of use to those who are left with no better alternative.
Eligibility and Repayment
Filing for Chapter 13 results in the petitioner having to discharge debts over a period of 3 to 5 years, in accordance with a repayment plan that is worked out by the trustee, after the debtor is questioned in the presence of creditors about his/her financial affairs. The debtor is expected to have sought credit counseling within 180 days, prior to filing for bankruptcy. Petitioners also need to be current on their Federal and State income tax returns.
The proposed repayment plan is worked out after taking into account the income, expenditure, and debts of the petitioner. The total amount of unsecured and secured debts cannot exceed $336,900 and $1,010,650, respectively. This plan has to be presented in front of the trustee and the creditors. The bankruptcy court approves or disapproves the plan within 45 days of this meeting. The debtor needs to start making payments to the creditors within 30 days of filing bankruptcy, irrespective of whether the court has approved the repayment plan.
