Chapter 13 Bankrupt

What is Chapter 13 Bankruptcy?

If you are considering filing Chapter 13 bankruptcy you have probably already sat down with a personal bankruptcy attorney and chose the best course of action for your current situation. If you haven’t had a free consultation yet, you should. There are many other options besides Chapter 7, Chapter 13 and a consumer proposal.

Chapter 7 is how you give up almost all your assets and clear all your debts. It’s everything in and everything cleared off your debts. (with some exceptions)

Chapter 13 bankruptcy includes coming up with a plan to pay back the debt that is owed. This indicates that to be eligible to file you have employment and/or an income and possess the ability to keep up with a repayment plan. Depending upon your income the court will grant you a 3-5 year schedule of repayment.  It is your responsibility (with your attorney) to come up with the plan, so it is important that you work with the right law firm to help you with the process.

Think of Chapter 13 Bankruptcy as combining all your monthly payments and debts into a single payment. You make one payment, send it to the trustee, and they distribute it to your creditors. The whole process is much easier and reduces stress as long as you keep up with the repayment plan. There is no regular communication between you and creditors hounding you for money. No more unwanted threatening calls or letters. Once the court puts you in Chapter 13, all communication and correspondence with your creditors stops.

What Is Different About Chapter 13 Bankruptcy?

Chapter 13 bankruptcy protection doesn’t require that you liquidate all of your assets. You might be able to keep your car and your home. If the home is in the middle of foreclosure that process stops. You will still have to make payments on everything throughout the time span of your plan. For many people the ability to keep their home while they work through the repayment plan is a major benefit of this filing.

The fact that Chapter 13 allows many to keep their home is the number one advantage of this program. You might even be able to pay lower monthly payments than before your filed. That’s a major benefit.

Chapter 13 Pitfallspaymentplan

The Chapter 13 process¬† takes a great deal longer than Chapter 7 bankruptcy. Chapter 7 can be over and done in as short a time as six months. Also, if you run out of money and can’t make your repayment schedule any time during your 3-5 year schedule you’ll probably be forced into Chapter 7. Some would prefer to bite the bullet now instead of risking that prolonged situations.

There are two usual methods of paying your monthly debts. You can issue checks to your trustee. They will deposit the funds and distribute them to your creditors based on the agreed schedule.  You might also opt to have a payroll deduction on your wages. Your repayment monies are taken right from your employer, before they are deposited into your account. If you have trouble managing money, this is a good choice.

I hope this article has helped you understand the differences between Chapter 7 and Chapter 13 Bankruptcy.