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Chapter 13 provides opportunity for debt adjustment

When people find themselves in the midst of serious financial challenges, it is easy to think that there is no effective solution. That is oftentimes untrue, however, as there are a range of options and debt relief solutions that can help with repayment and liquidation of debt. For people who can count on regular income, Chapter 13 could be a viable solution as it provides for adjustment of the individual's debt and does not require liquidation of assets.

In order to take advantage of Chapter 13 bankruptcy, a person must first file a bankruptcy petition. The petition alone is insufficient to commence the case, however. It must be accompanied by a listing of the filer's assets and liabilities, income and expenditures, and executory contracts and leases. The filer must also provide a statement of his or her financial affairs. Other financial evidence is also required, including payment from employers, interest in certain accounts, monthly net income, and tax returns.

Chapter 13 filers must provide extensive and detailed information about their personal financial affairs. They must be able to specifically identify all creditors and the amount and type of debt owed to each one; all income received, specifically noting the source, amount and frequency; all property owned; and categorized monthly expenses related to housing, food, transportation, medical needs, etc.

The goal of Chapter 13 bankruptcy is to give individuals who have reliable income the opportunity to repay their debts over time. Generally, a chapter 13 repayment plan will lower an individual's payments, making it more feasible to actually repay debts. Chapter 13 is advantageous in many cases because it often allows the filer to keep his or her home and avoid foreclosure, it protects co-signers, and it allows rescheduling or adjusting existing debts to decrease financial strain, all while preventing contact and harassment from creditors during the repayment plan period.

Source: United States Courts, "Individual Debt Adjustment," last accessed Dec. 21, 2014

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