Why Chapter 13 Bankruptcy May Be A Good Idea
Posted By Bob Tremerituus on January 5, 2011
One never knows what’s around the corner, particularly when it comes to world events, which can have a long reach and affect many people.
Sometimes in the Western world we become complacent, making hay whilst the sun shines and paying little or no regard to the inescapable truth that eventually things will change. This is especially true of economies, and in recent times we have perhaps seen the results of growing complacent.
There has been a surge in people wanting good advice about their finances in the light of the world recession. With so many businesses going under or “streamlining” unemployment rates have climbed and in turn, many people have become bankrupt.
Chapter 13 is what is known as a repayment plan. On filing chapter 13 the court examines all outstanding debt and the income of the individual (this has often already been done if the individual failed the chapter 7 means test). The court then works out a repayment plan, which involves creditors being repaid over a 3-5 year period.
Whilst this may sound simple enough, the terms can be quite harsh, leaving the individual or business in a cash poor situation until the debts are repaid and the bankruptcy discharged.
Chapter 13 can actually be of great benefit. For example if someone has spent years building a business and is experiencing financial difficulties, but can demonstrate as much to themselves as the court, that things are going to improve, chapter 13′s repayment plan is then effectively a way of catching up. In addition, because no assets have to be sold, the company has an opportunity to trade its way out of trouble.
Another advantage of chapter 13 bankruptcy is that it prevents foreclosure. For example, if repayments have not been kept up on a piece of machinery, that piece of machinery cannot be repossessed once chapter 13 bankruptcy has been filed. In this way chapter 13 bankruptcy protects the individual or business, and by doing so protects the creditors as well, by ensuring that they are repaid any outstanding debt in full, albeit over a slightly longer time frame than should have been the case.
The alternative chapter 7 bankruptcy, whilst the most popular form of bankruptcy for individuals, is less welcome for many businesses. This is because chapter 7 is an enforced sale of assets, which often results only in partial repayment to the creditors and destroys the business, everyone loses. Chapter 13 can be a lifesaver for both the business and the creditors.
Bankruptcy should not be entered in to lightly and is a difficult experience. If you would like further free information regarding declaring yourself bankrupt, visit this free website declaring yourself bankruptwww.declaringyourselfbankrupt.net.
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