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Chapter 13 bankruptcy may reorganize debt

As some Texas residents may know, Chapter 13 bankruptcy may allow an individual to pay back their debt and keep their property. The payback period depends on the debtor's income. The greater the debtor's monthly income, the longer the repayment time, but the typical plan lasts from three to five years.

A debtor's eligibility for Chapter 13 bankruptcy is determined by the size of the debt. Unsecured debt, such as medical or credit card debt, cannot exceed $383,175 and secured debt, where the creditor can repossess the object, cannot exceed $1,149,525. If the debtor's income is too low to pay their debt or if it varies greatly each month then the court may deny the bankruptcy petition.

There are other reasons the court may disallow a bankruptcy petition. The court may deny the petition if the debtor had a bankruptcy request dismissed either voluntarily or because they did not obey the court's orders within the previous 180 days. If the consumer did not appear in court, the court may also deny the petition. The debtor must also prove to the bankruptcy court that they received credit counseling from a court-approved agency.

Chapter 13 functionally consolidates the filer's debts. In some cases, this may help the filer maintain ownership of many of their assets. One of the benefits of Chapter 13 Bankruptcy is its ability to help a consumer avoid foreclosure. This requires debtors to pay delinquent mortgage payments over time, and current mortgage payments must be paid in a timely fashion.

An attorney who is familiar with bankruptcy proceedings may be able to offer advice and help to a person who is seeking debt relief through Chapter 13. In addition to helping the client understand the process, the attorney may also provide representation in meetings with bankruptcy trustees and creditors when necessary.

Source: United States Courts, "Individual Debt Adjustment", September 29, 2014

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