The last choice for settling debts and avoiding foreclosures is to file for bankruptcy. Although it has its disadvantages such as carrying an unfavorable mark on your credit record for a certain amount of time, bankruptcy nevertheless helps in clearing out debts and giving debtors a new start.
Those who wish to get the benefits of Chapter 13 bankruptcy should know that not everyone is eligible. Knowing how Chapter 13 works can help in understanding if you qualify for it or you can choose another option. First, businesses (whether owned by one person or more) are not eligible for Chapter 13 if they wish to apply under the company’s name. You can only file for Chapter 13 as an individual, putting your business-related debts as your personal responsibility.
Next, to be eligible for Chapter 13 you must be able to prove that your income is enough for a repayment plan. This income is determined after deducting certain allowable expenses and necessary payments for secured debts. The repayment plan you present should allow you to pay for specified debts in full, otherwise the judge may not approve of your repayment plan. If you have applied for bankruptcy within 180 days but were dismissed, you are not qualified to file for Chapter 13. Also, those who wish to file for Chapter 13 bankruptcy should attend a certain number of sessions on credit counseling within 180 days before actually filing.
The advantage of Chapter 13 bankruptcy is that it allows debtors to keep certain properties or assets while paying their creditors. Chapter 13 bankruptcies is generally aimed for people who wished to pay off their debts in an acceptable setting, thus the need for a strict standard is necessary in order to increase the number of debtors who has the capacity to pay their creditors.