Chapter 13 Repayment

Distressed debtors who wonder what Chapter 13 bankruptcy is, will get a firsthand look at insolvency when Chapter 13 repayment plans are implemented by the U.S. Bankruptcy Court. But, the three- to five-year court-mandated debt resolution plan can actually benefit the debtor in the long run.

A court-appointed U.S. trustee or administrator oversees and distributes the debtor’s disposable income to settle secured and unsecured creditor claims. Secured claims are those filed by lien holders of property which can be used as collateral, such as homes, cars, equipment, or inventory.

Trustees are charged with the responsibility of deciding which secured and unsecured claims are to be paid and how much disposable income debtors can afford to contribute to the plan. A chapter 7 bankruptcy liquidates debtor assets to settle creditor claims, in compliance with a court-ordered debt resolution plan.

Unsecured creditors can file claims, however since these claims are collateral-free, they are considered secondary. The court defines disposable income as wages or other liquid assets filers receive on a regular basis. Child support payments and assets necessary for the debtor’s subsistence are exempt.

When people begin the bankruptcy process they usually have no idea that the process can be so tedious or so long. There’s quite a bit of paperwork, checking information and then time. Bankruptcy doesn’t happen overnight, and debt incurred by a failure to make timely payments over a long period of time can’t be fixed without a plan to settle delinquent accounts.

The federal government is interested in re-educating debtors regarding the fine points of personal financial management before coming to court. Debtors are required by law to attend an approved consumer credit counseling agency within six months prior to filing.

Counseling sessions may convince debtors that Chapter 13 bankruptcy is not the best move to make for a particular financial situation. Some indebtedness can be cured by consolidation or debt reduction.

Find out from Orlando bankruptcy attorneys Eric Lanigan and Roddy Lanigan if filing Chapter 13 bankruptcy in Florida, although a commendable effort on the debtor’s part to satisfy unpaid claims, also has serious repercussions.

Filings remain on credit reports for up to 10 years and can have an adverse effect on a debtor’s ability to obtain future financing. Debtors should refrain from filing wage earner petitions for consumer debt protection, or from filing chapters 7 and 11, unless every other means of debt reduction or relief have been exhausted. Before taking such a drastic measure to file for insolvency, debtors should consult with consumer counseling agencies to help determine the best method of resolving personal or business indebtedness. Financial counselors can help individuals restructure and consolidate debts before they get out of hand. Businesses can also devise a plan to restructure expenses before fiscal affairs get to a point of no return.

Before filing Chapter 13 bankruptcy debtors need to ask what to do in order to become more informed and less apt to incur debts that they cannot pay. Insolvency not only reflects poorly on consumer credit reports, but filing can prohibit qualified applicants from securing a good job.

Today’s prospective employers not only screen for drug and substance abuse, but many also require clean credit records and good scores. An insolvency filing is like a bold, black mark on a consumer record which sends a red flag to a prospective employer, especially in high-security enterprises, such as law enforcement and financing.

By studying both the symptoms and the repercussions of filing insolvency, consumers can avoid the headache, the hassle, and the haunting embarrassment of long-term financial failure.