Many Americans struggling with debt will turn to Chapter 13 bankruptcy to resume control over their budgets. Unlike Chapter 7 bankruptcy, which requires the liquidation of non-exempt property, Chapter 13 bankruptcy doesn’t put you at risk of losing your house or other assets.
Instead of requiring that you sell off your property or refinance your biggest assets, Chapter 13 bankruptcy involves making structured payments to creditors whose debts are subject to discharge. You can protect more personal property and have a higher level of personal income while still qualifying to file for Chapter 13 bankruptcy.
After you complete the court approved repayment plan, you will then receive a discharge of the remaining balance on your eligible unsecured debts. How does the repayment process work in a Chapter 13 bankruptcy?
You negotiate a plan with the trustee and your creditors
When you file for bankruptcy, the courts will assign a trustee to oversee your case. In a Chapter 13 bankruptcy, the trustee schedules the creditor meeting. The trustee reviews the financial records of the person filing and asks questions during the meeting.
You create a repayment plan that works both for the creditors and the person filing for bankruptcy. The goal is to repay as much as possible from debts that the courts will eventually discharge without leaving someone unable to pay their other bills.
You will typically have to invest most all of your disposable income that doesn’t go toward necessary household expenses on the repayment of your debt. You will need to make a payment directly to the trustee every month for somewhere between three and five years.
Provided that you complete the repayment plan successfully. The courts can grant you the discharge of the remaining balance of your qualifying debts. In many cases, you can get a discharge even though only a small percentage of your debt was paid.
Chapter 13 bankruptcy is an accessible and helpful form of bankruptcy
Filing for Chapter 13 bankruptcy will end aggressive creditor collection attempts. It can help you work out a better budget and discharge your debts. It can also lead to a discharge, which reduces how much you have to pay.
Learning more about Chapter 13 bankruptcy can help you decide if it is the right solution for your current financial woes.