Chapter 13 bankruptcy, on the other hand, was largely unaffected by the extensive changes. The original intent of this section was to prevent a property from going into foreclosure. With the enormous number of foreclosures occurring in the United States today, it is unfortunate that many people are still unaware that Chapter 13 bankruptcy can be used to prevent home foreclosure.
There are three distinct types or chapters of bankruptcy available to the average consumer, depending on their particular circumstances. Chapter 7 bankruptcy is the most common form and is also referred to as a liquidation. Clearly, the term liquidation derives from the fact that the majority of their debt is discharged by allowing the court-appointed trustee to liquidate all of their non-exempt assets. Despite this chapter, there are certain categories of debts that cannot be discharged by filing for bankruptcy.
Although it used to be more appropriate for businesses or individuals with substantial assets and income, Chapter 11 bankruptcy is also available to consumers. It is commonly known as a business reorganization. This form of bankruptcy does not eliminate debts, but rather allows the debtor to reorganize his or her debt structure and make revised payments to creditors, sometimes over a longer period of time and with a lower interest rate. Creditors are typically amenable to this, as collecting their money over time with interest is unquestionably preferable to having the debt completely discharged through a different chapter.
Chapter 13 is the final form or chapter of bankruptcy available to consumers. It is also commonly known as the Wage Earner's Reorganization. This variety is the cheapest to file and is typically used by consumers who are still capable of meeting their financial obligations within three to five years. In addition to taking into account their level of income and any non-dischargeable debts, the total value of their non-exempt assets is used as a premise and guideline for the amount that must be repaid over this period of time.
But what many consumers do not realize is that Chapter 13 bankruptcy also allows homeowners who are behind on mortgage payments to halt foreclosure proceedings. While the same can be said for the other consumer bankruptcy chapters, Chapter 13 is designed to permit the consumer to pay the delinquency in equal monthly installments for up to 60 months (5 years). As long as all other requirements and qualifications of this chapter are met, the mortgage lender is compelled to grant permission.
The procedure to qualify for this chapter is more stringent than the others, as it requires a comprehensive examination of total debt and income. With all the new legal requirements in place, no chapter of bankruptcy is considered a """"do-it-yourself"""" process, so regardless of which chapter you are considering, it is strongly advised that you consult with a qualified bankruptcy attorney to ensure that you, your property, and your specific situation qualify.
If you qualify for Chapter 13 bankruptcy and you are facing foreclosure proceedings, the greatest advantage is that it buys you time. This time can be used to improve your financial situation or to locate the ideal buyer for your home. If you proceed, bear in mind that the time allotted to you is limited, and you must begin planning and taking action IMMEDIATELY.""
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