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Filing chapter 13 bankruptcy

People who are considering filing bankruptcy in Washington, D.C., may be confused by the different chapters. Chapter 13, also known as an individual debt adjustment, provides several advantages over choosing liquidation under chapter 7.

In Chapter 13 bankruptcy, the debtor proposes a repayment plan for their owed debts that lasts over a period of three to five years. In order to qualify under the chapter, debtors must not exceed certain debt levels for outstanding debt owed, and they must have a regular source of income. The chapter has several advantages, including allowing debtors to retain property. The biggest advantage is the ability to stop foreclosure proceedings and to catch up the mortgage delinquency over the life of the repayment period.

The process is initiated by filing a Chapter 13 petition, paying the filing fees and filing a statement of financial affairs. The debtor will also need to file proof of income from the previous 60 days, the most recent tax return, documentation of any expected income increases and a credit counseling certificate. The debtor will propose a repayment plan. After the trustee is appointed, the trustee will administer the estate. A creditors' meeting will be held, and the creditors will be allowed to object to the repayment plan and question the debtor under oath. Upon approval, the debtor will enter into the repayment period. He or she will be required to make monthly payments, submit any required reports and follow all terms of the plan.

Although Chapter 13 may not be the best option for everyone, it is a good option for those who want to save their home from foreclosure. People may wish to speak to a bankruptcy attorney about whether it is the right choice for them.

Source: United States Court , "Individual Debt Adjustment", November 24, 2014

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