WHAT YOU SHOULD KNOW ABOUT CHAPTER 13 BANKRUPTCIES
If a debtor has property, which he/she needs to protect, or other assets, a debtor may want to consider a petition of bankruptcy under Chapter 13 of the Bankruptcy Act. Chapter 13 is the consumer's answer to the corporate reorganization. A debtor promises to pay all creditors under a plan approved by the court and administered by a trustee, usually over 36 months, but no longer than 5 years. It may be the full amount or as low as ten cents on the dollar.

Individuals need to be highly leveraged with a source of income to file Chapter 13, for its protection of secured debt and potential to virtually eliminate unsecured debt. Keeping property is possible because of certain exemptions allowed by state law (as well as debtor's ability to re-pay his/her secured creditors). For example, because of the $7,500.00 home exemption per person, $15,000.00 of equity is exempt for married couples filing bankruptcy. If their home has an $85,000.00 mortgage and the market value of $100,000.00, and providing they can pay their living expenses plus the mortgage and pay on the plan, they should keep the house.

In a Chapter 13 case creditors are paid back "prorate from the pot," or equitably. If a debtor chooses to keep a certain charge card with a Chapter 13, they pay the balance before he/she files bankruptcy. The law does not require that a debtor disclose in the bankruptcy petition a debtor that has been paid off. Therefore, certain bank card companies, may allow a debtor who has filed bankruptcy to keep the account open, if the account was paid off prior to filing bankruptcy.

Repetitive filings are possible, but a court can deny a Chapter 13, if there is no change in the person's situation that prevents paying as agreed in the plan. Changes that may have triggered bankruptcy in the first place, such as divorce, job loss, serious medical problems or excessive charging on credit cards also can affect the pay back. Despite efforts and intentions to pay back creditors, it does not always work, and debtors many times have to file a Chapter 7, after they have file a Chapter 13.

Bankruptcies with Chapter 7 discharges a debtor's debts, excluding taxes, child support and student loans, but a debtor cannot file for a full six years. A Chapter 7 is a more dramatic and immediate form of relief for debtors with a much greater loss to creditors than the Chapter 13. Few debtors file bankruptcy if they have assets because a trustee has an obligation to convert these assets to cash to pay creditors. It includes the family heirlooms and the jewelry that exceed $2,000.00 exemption per person for personal possessions. Among other exemptions under state law are retirement, KEOGH and profit sharing plans. There is no cap on the amount.

Once a debtor has declared bankruptcy, the credit reporting bureau keep a Chapter 7 on his/her record for ten years, a Chapter 13 for seven years.

A debtor should consider seriously alternatives to filing bankruptcy, but if a bankruptcy is the only alternative there are ways for a debtor restoring his/her credit worthiness after filing bankruptcy. Remember, bankruptcy is the governments answer to giving people a fresh start.