Chapter 13

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There may be circumstances in which you are not in a position to discharge your debts. This may be due to financial constraints resulting from expensive medical bills, marital problems, losses in business, or other factors. In circumstances such as these, you may file for bankruptcy under chapter 13. If the court is satisfied with your case, it may grant you permission to pay off your debts, partially or wholly, in installments. The time period is usually three years, but in some cases, the court may also allow you to pay over a period of five years. It is important to note that you are eligible for chapter 13 only if your debt is not very high.

To file for bankruptcy under chapter 13, you will need to fill a two-page application form duly signed by you and your attorney. The application form is easily available in all stationery shops.

You'll also be required to pay a filing fee and an administrative fee to the court. If you are unable to pay the fee in lump sum, then you can pay it in installments also. However, the maximum installments cannot be more than four. The court clerk accepts the fee on behalf of the court.

Under chapter 13, the court helps you organize your debt payment plan and enables you to make monthly payments to the trustee who is appointed by the court to disburse the proceeds to your creditors. The trustee receives a 3 to 10 percent commission for his services. The debt payment schedule has to be prioritized according to a predefined procedure.

Court charges, alimony, child support and income taxes, among others, have to be paid in full. These payments come under secured debts. However, you get laxity under the unsecured debts, which you are allowed to pay according to your income and assets. The discretion of the bankruptcy court plays a significant role here. Some courts do not approve of a repayment plan that does not allow for paying back at least 50 percent of their owed debts. Under chapter 13, therefore, sometimes the creditors have to be satisfied only with a small refund.

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Thursday, April 10, 2008 17:21