Chapter 13 Bankruptcy Is Not Always A Bad Idea
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One never knows what's around the corner, particularly when it comes to world events, which can have a long reach and affect many people.
We all like to think that our country's economy is being well managed and run and that we are in control of it, and in some cases we can through interest rates etc., but we are never fully in control. World events are random and unpredictable, and there is a certain amount in our own economies that is not regulated and also subject to change, and for which many of us have paid a heavy price in recent years.
These recent economic catastrophes have meant that more and more businesses and individuals have been forced onto bankruptcy in recent years. This has led to an increase in those seeking information about to how to go about claiming bankruptcy and which chapter to file under.
Chapter 13 was designed to ensure that all unsecured debt is repayed if the debtor is deemed to have sufficient income to do so. The court rescedules debt repayments etc, and the debtor is then given a legally binding repayment plan which is a series of payments spread over three to five years.
Chapter 7 was abused in years past, with people hiding their income and assets and using chapter 7 simply as ameans of removing debt that they could, in fact, afford to repay. The means test now makes it very hard for people to conceal their wealth, and many are forced into chapter 13 ensuring that where debt can be paid, it is indeed paid, though the repayment terms can be pretty tough and leave very little cash left over on a monthly basis.
Chapter 13 can actually be of great benefit. For example if somone has spent years building a business and is experiencing financial difficulties, but can demonstrate as much to themselves as the court, that things are going to improve, chapter 13's repayment plan is then effectively a way of catching up. In addition, because no assets have to be sold, the company has an opportunity to trade its way out of trouble.
Once chapter 13 is filed, no one who is owed money can press for forclosure. If a business for example, owes money on capital equipment, this means that they can keep it, subject to the repayments included in the repayment plan being met. The outcome is that the business can therefore continue to do business with no loss of key assets, and the creditors will eventually get paid in full, rather than potentially lose money in a chapter 7 liquidation case.
The alternative would be a chapter 7 filing, where all assets are liquidated and the proceeds distributed amongst the creditors. However, there is often not enough money to repay in full, or even close to it, thus making chapter 13 a more satisfactory method as more debt is repaid.
Article Source: Articlelogy.com
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