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Chapter 13 bankruptcy: benefits and basics

A person in Oregon who has fallen behind on payments or is struggling to meet all financial obligations may find a solution through a Chapter 13 bankruptcy. According to the Cornell University Law School’s Legal Information Institute, this type of bankruptcy typically allows people to keep their homes, and even some of the equity they have accumulated. Individual retirement accounts are also generally safe, and cars. Keeping these three major assets in place while paying off some debts and having others discharged make this reorganization plan appealing to many.

Taxes, student loans and child support are not usually dischargeable. The United States Courts explains that these are considered priority claims, and must be paid in full through the plan. Secured claims are tied to assets, such as a vehicle, and the debtor cannot pay less than the value of the item. Although a mortgage payment is a secured claim, the amount included in the repayment plan is typically only the amount that the debtor is behind. He or she must still make the regular mortgage payments, as well.

Unsecured claims do not have to be paid in full, but they are included in the plan if there is any disposable income that may be added to the monthly payment after a person’s basic living expenses are taken care of. To determine the amount that a debtor may reasonably pay each month toward debts, the court requires the following:

  •          Claims, including the amount, the type and the creditor
  •          Income, such as wage amounts and how often they are paid
  •          Property
  •          Living expenses

Even if only one spouse is filing for bankruptcy, he or she must still provide the same information for the other spouse in order to give an accurate account of the financial situation for the entire household.

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