Chapter 13 bankruptcy focuses more on repayment and reorganizing options rather than eliminating debt. Filing for Chapter 13 bankruptcy also allows the debtor to keep their property while beginning the repayment of debt to the creditor even if the debtor is behind in payment. This form of bankruptcy allows the debtor to repay the debt at the debtor’s convenience rather than the rate the creditor has established. Chapter 13 bankruptcy usually lasts 36 to 60 months due to stretching out the debtor’s time to pay back the debt.
Let's say you have $60,000 in credit card debt and medical bills and you are eligible to pay back 10% of the debt. Your payment will be $100 per month for 60 months or 5 years. At the end of the 60 months you will have paid a total of $6,000 and the remaining $54,000 of your debt will be eliminated or discharged. You will not have to pay it.
The rate at which the debtor must pay back the creditor is determined by the debtor’s median income and current assets. The debtor must be able to meet their repayment obligations based on their income. If the debtor is unable to meet the repayment criteria as a result of insufficient income, the debtor may not be eligible for Chapter 13 bankruptcy. Laws effective as of April 2016 state that secured debts cannot exceed $1,184,200 while unsecured debts cannot exceed $394,725. The debtor is also ineligible to file for Chapter 13 bankruptcy if the secured or unsecured debts exceeds these values.
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